Demis Hassabis, CEO of Google DeepMind, has issued a warning that the current investment frenzy in artificial intelligence is showing clear signs of a "bubble," with capital flows increasingly detached from commercial fundamentals.
Hassabis pointed out at the World Economic Forum in Davos that some startups are securing billions in seed funding without having any products or technologies ready for deployment, a phenomenon he described as "unsustainable." He suggested the market is not only experiencing irrational exuberance but is also highly likely to face a correction in certain areas in the future. This stance contrasts sharply with the views of NVIDIA CEO Jensen Huang and Microsoft CEO Satya Nadella, who have denied that the industry is over-invested.
Despite warning of an industry bubble, Hassabis emphasized that Google, with its business scale and technological moat, is well-positioned to withstand potential market turbulence. He explicitly stated, "We'll be fine even if it bursts," noting that Google has a robust business foundation, can enhance productivity by integrating AI features, and is seeing stronger-than-ever demand for its latest model, Gemini 3.
Hassabis expressed concern about the blind enthusiasm in the venture capital community. He highlighted that investors are rushing to back startup groups like Thinking Machine Lab, founded by former OpenAI executive Mira Murati. Despite being only six months old and having disclosed almost no details about the product it is building, the company has already reached a valuation of $10 billion.
This phenomenon is seen as a classic case of an overheated market. Thinking Machine Lab has recently lost several key employees, raising questions about its long-term prospects. Furthermore, investors are beginning to worry about the multi-billion dollar race to build AI infrastructure, particularly high-leverage debt deals that rely on future growth in technology adoption rates to be viable. Hassabis believes this influx of capital, detached from business reality, could lead to a market correction in the future.
Facing the potential for an industry reckoning, Hassabis expressed confidence in Google's resilience. He stated that AI is "perhaps the most transformative technology ever," and that Google has rebounded from the difficult period following OpenAI's release of ChatGPT in 2022.
According to Hassabis, Google's current AI models now outperform its smaller competitors and are closing the gap in terms of chatbot user numbers. Driven by this progress, parent company Alphabet's market capitalization has surpassed $4 trillion. Hassabis stressed that Google's amazing business foundation, which gains higher productivity from adding AI capabilities, makes the company safe amidst industry volatility.
Discussions in Davos also focused on the growing risks associated with AI. Recently, OpenAI faced lawsuits over allegations its chatbot encouraged a young person's suicide, while Musk's xAI was criticized for its Grok chatbot generating pornographic images. Hassabis emphasized the critical need to focus on safe and responsible AI development, stating that DeepMind will double down on applying AI in science and medicine.
Additionally, Hassabis reaffirmed Google's long-term vision for smart glasses. Although Google Glass failed over a decade ago, he believes a universal digital assistant will be the "killer app" for smart glasses. Google announced partnerships last year with fashion groups like Warby Parker, seeking to launch new glasses integrated with AI.
As a central figure in Google's future plans, Hassabis has gained more control and responsibility within its AI business in recent years. However, he dismissed speculation that he is being groomed to eventually succeed Sundar Pichai as CEO of Alphabet.
Hassabis said he is very satisfied with his current role and enjoys being close to the frontiers of science and research. He admitted, "There's a limit to what you can do in a day, and you need to leave enough time for serious thinking."
Comments