The CEO of Google DeepMind, Demis Hassabis, warned that certain parts of the artificial intelligence sector have entered a 'bubble-like' phase, characterized by unsustainable valuations in private markets.
Speaking at recent industry events, Hassabis cautioned that seed-stage startups are receiving valuations of several billion dollars despite the absence of functional products or underlying technology.
This criticism coincides with a cooling period for AI-related cryptocurrencies, whose total market capitalization has slipped to $18.7 billion.
While larger projects like Bittensor (TAO) and NEAR Protocol (NEAR) have shown relative resilience, assets such as Internet Computer (ICP) and Virtual Protocol (VIRTUAL) have recorded daily declines of up to 5%.
Hype vs fundamental utility
Hassabis compared the current frenzy around AI to the dot-com era, suggesting that an 'adjustment' is inevitable for companies that rely solely on investor hype.
He argued that, even though the Internet ultimately became transformative, many early companies went bankrupt when speculative capital withdrew during the market correction of 2000.
The head of DeepMind emphasized that Google remains protected against such volatility, as the company integrates AI into existing revenue-generating activities to improve operational productivity.
Microsoft CEO Satya Nadella expressed similar views, stating that global adoption must extend beyond tech circles to justify current levels of investment.
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Macroeconomic headwinds for AI tokens
The pullback of AI tokens seems linked to broader macroeconomic factors, beyond the statements of executives. Market sentiment has weakened after signals indicating that the U.S. Federal Reserve is unlikely to lower interest rates at its upcoming January meeting.
Investor caution is also rising as a busy week of earnings approaches, during which one-fifth of the S&P 500 will publish its quarterly results.
These reports should help determine if the 'AI premium' embedded in tech stocks actually translates into profit growth or if it merely masks structural inefficiencies.
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