Bubble? No trouble. Altman admits “insane” AI mania while planning trillion-dollar spending

OpenAI CEO Sam Altman has openly acknowledged that artificial intelligence is currently experiencing a bubble, with “insane” valuations and irrational investor behavior driving the market. Despite warning that some investors will get “very burnt,” Altman remains committed to aggressive spending on AI infrastructure, with OpenAI planning to invest trillions in datacenter construction as demand outpaces what any single cloud provider can supply.

What they’re saying: Altman didn’t mince words about the current state of AI investment during a recent dinner with reporters.

• “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes,” he said, repeating the word ‘bubble’ three times in 15 seconds.
• “I do think some investors are likely to get very burnt here, and that sucks. And I don’t want to minimize that,” Altman acknowledged.
• However, he maintained his long-term optimism: “Is AI the most important thing to happen in a very long time? My opinion is also yes.”

The spending spree continues: Major tech companies are dramatically increasing their capital expenditure to keep pace with AI infrastructure demands.

• Microsoft is now targeting $120 billion in full-year capital expenditures, while Amazon is topping $100 billion.
• Alphabet raised its forecast to $85 billion, and Meta lifted the high end of its capex range to $72 billion.
• OpenAI itself is “beyond the compute demand” of what any single hyperscaler can offer, having signed deals with both Microsoft Azure and Google Cloud.

In plain English: Capital expenditures (capex) refer to the money companies spend on physical infrastructure like servers, data centers, and computing equipment. Hyperscalers are massive cloud computing providers like Microsoft, Amazon, and Google that operate enormous networks of data centers worldwide.

Why analysts aren’t worried: Financial experts are pushing back against comparisons to the dotcom bubble of the late 1990s.

• Citi’s Rob Rowe noted that unlike the dotcom era, today’s AI companies “have very solid earnings, very strong cash flow, and they’re funding a lot of this growth through that cash flow.”
• Wedbush’s Dan Ives, a tech analyst, reported that demand for AI infrastructure has grown 30% to 40% in recent months, calling the current moment the “second inning of a nine-inning game.”

The contrarian view: Not everyone is convinced the spending is sustainable or necessary.

• Alibaba co-founder Joe Tsai warned of a brewing AI bubble in March, expressing concern about companies building datacenters “on spec” without clear demand.
• Tsai questioned whether hundreds of billions in datacenter spending is truly necessary given the scale of investment under discussion.

Altman’s long-term bet: The OpenAI CEO frames the current bubble as part of technology’s natural evolution, similar to the dotcom crash that ultimately enabled the modern internet.

• “You should expect us to take as much compute as we can,” Altman said, describing OpenAI’s approach as potentially spending “more aggressively than any company who’s ever spent on anything ahead of progress.”
• His conviction stems from “this very deep belief in what we’re seeing” regarding AI’s potential societal value, despite acknowledging the near-term risks for investors.