What could burst the AI bubble?

Core Insights - Major tech firms have significantly increased in value over the past year, driven by advancements in AI, with expectations of transformative impacts across various sectors [1][2] - OpenAI's valuation has surged to US$500 billion from US$157 billion in the previous year, while Anthropic's valuation has nearly tripled, raising concerns from the Bank of England about a potential market correction [2][3] - The sustainability of these valuations is questioned, with discussions around whether they are based on realistic future profitability or merely speculative optimism [3][7] Valuation and Profitability - OpenAI, despite its high valuation, has not yet achieved profitability and may need to increase revenue tenfold to do so [11][12] - The US$500 billion valuation is particularly striking given OpenAI's reported loss of US$7.8 billion in the first half of the year, with some value attributed to a deal with Nvidia involving mutual investments [12][13] - AI firms, in general, are currently not profitable, with investments being made based on anticipated future gains rather than current financial performance [13][15] Market Dynamics and Risks - The rapid rise in valuations is seen as an early sign of a potential bubble, with the possibility of a correction if investor confidence wanes [6][10] - Historical parallels are drawn to the dotcom bubble, suggesting that minor events can trigger a reevaluation of investments, leading to a sell-off [10] - The major tech companies are investing heavily in AI infrastructure, which could lead to a bubble burst if the anticipated future does not materialize [15]