We may or may not be in an AI bubble, but more and more voices are not discounting the fact that we could indeed be in one.
In a recent interview with the BBC, Google CEO Sundar Pichai offered a remarkably candid assessment of the artificial intelligence investment frenzy that has captivated Silicon Valley and beyond. Rather than dismissing concerns about overheating in the AI sector, Pichai acknowledged both the rationality driving massive capital deployment and the inevitable excesses that accompany transformative technological shifts. His comments provide a rare glimpse into how one of AI’s most prominent architects views the current moment—with optimism tempered by historical perspective.
“Of this technology, the excitement is very rational,” Pichai began, affirming the fundamental promise of AI. But he quickly added a crucial caveat: “It’s also true when we go through these investment cycles, there are moments we overshoot, right? Collectively as an industry.”
Drawing parallels to the dot-com era, Pichai noted, “We can look back at the internet right now. There was clearly a lot of excess investment. But none of us would question whether the internet was profound or did it drive a lot of impact? It’s fundamentally changed how we work digitally as a society.”
This historical comparison serves as both reassurance and warning. The internet bubble of the late 1990s saw spectacular valuations followed by catastrophic crashes, yet the underlying technology ultimately proved transformative. Pichai seems to suggest AI is on a similar trajectory. “I expect AI to be the same,” he said, before concluding: “So I think it’s both rational and there are elements of irrationality through a moment like this.”
Pichai’s observations arrive at a critical juncture for the AI industry. Tech giants including Google, Microsoft, Amazon, and Meta have collectively pledged hundreds of billions of dollars toward AI infrastructure, from data centers to custom chips. Microsoft’s partnership with OpenAI alone has involved investments exceeding $13 billion, while Google has aggressively expanded its own AI capabilities through products like Gemini and significant compute infrastructure buildout. Meanwhile, AI startups have attracted record venture capital funding, with valuations that sometimes seem detached from current revenue realities.
In recent times, there are more and more people voicing concerns around an AI bubble. Klarna’s CEO today said that he was “very nervous” about the massive investments in AI datacenters. Just last week, Softbank had sold its entire stake in NVIDIA worth $5.83 billion, and it had emerged that Peter Thiel had done the same with his $100 million stake. For good measure, someone has remade the infamous “Here comes another bubble” Silicon Valley classic with an AI version of the song.
But Sundar Pichai’s acknowledgment of “irrationality” is particularly striking given Google’s position at the center of the AI arms race. The company has faced pressure from investors and competitors alike as it races to maintain its dominance in search while pivoting toward AI-first products. Pichai’s willingness to question industry groupthink—even while participating in it—suggests a more nuanced understanding of market dynamics than the typical tech executive bravado would allow. Whether the current AI investment cycle proves to be another dot-com bubble or the foundation for the next technological revolution may not be clear for years. But Pichai’s framework offers a useful lens: transformative potential and market excess are not mutually exclusive, and recognizing both may be the most rational position of all.