VC warns AI spending creates ‘circular’ investment bubble

Bradley Tusk, founder and CEO of Tusk Ventures, a venture capital firm, discussed AI spending trends and investment priorities during a CNBC interview, addressing concerns about “circular spending” in the artificial intelligence sector. His commentary comes as investors and companies grapple with massive AI infrastructure investments while questioning their long-term sustainability and returns.

What you should know: Tusk characterized current AI spending as “expensive but necessary” given the potential trajectory of artificial intelligence development.

• The venture capital leader addressed growing concerns about circular spending patterns within the AI ecosystem, where companies invest heavily in AI infrastructure that may primarily benefit other AI companies rather than creating broader economic value.
• His comments reflect broader industry discussions about the sustainability of current AI investment levels and whether the spending will generate proportional returns for investors and the economy.

The big picture: The interview covered multiple aspects of the current tech investment landscape beyond just AI spending.

• Tusk shared insights on recent deal activity in the AI space, providing perspective on market dynamics and investor sentiment across various AI sectors.
• He also discussed where quantum computing fits into the broader technology growth narrative, suggesting continued diversification in tech investment themes as the industry matures.

Why this matters: Tusk’s perspective represents the viewpoint of institutional investors who are actively deploying capital in the AI sector while remaining cautious about market dynamics.

• The discussion of “circular spending” highlights a key concern among investors about whether AI investments are creating genuine economic value or simply moving money between AI-focused companies without broader benefits.
• His commentary provides insight into how venture capital firms are evaluating AI investments amid unprecedented spending levels across the technology sector, balancing optimism with prudent risk assessment.