AI Bubble: Google CEO Sundar Pichai has issued one of his strongest warnings yet about the possibility of an AI bubble, saying that even major tech giants like Alphabet would feel the impact if the current boom collapses. Speaking to the BBC, Pichai said the industry is showing “elements of irrationality” as companies rush to pour billions into artificial intelligence.
Pichai noted that the rapid surge in AI spending mirrors previous tech investment cycles where enthusiasm overshot economic reality. “I think no company is going to be immune, including us,” he said, comparing artificial intelligence to the early days of the internet—transformative, but often inflated.
The warning comes as Big Tech reaches record levels of AI-related spending. According to Goldman Sachs, giants like Google, Microsoft, Amazon, and Meta now use 95% of their operating cash flows on capital expenditures, buybacks, and dividends—up sharply from 80% in 2019. Wall Street analysts say this spike is largely driven by AI infrastructure costs.
Concerns of an AI bubble are growing across the market. Bank of America’s latest global fund manager survey showed that a net 20% of investors believe companies are overinvesting, marking the highest level of caution since 2005. Recent downgrades for Microsoft and Amazon echoed fears that generative AI may not yet deliver the profits many expect.
Despite the broader skepticism, Alphabet’s stock climbed 1.1% on Tuesday after Warren Buffett’s Berkshire Hathaway disclosed buying shares in the third quarter. The move boosted confidence in Google’s long-term AI strategy even as questions swirl about the sustainability of current valuations.
Pichai emphasized that the potential impact of artificial intelligence remains historic. He said AI’s transformative power will rival the invention of the internet, but warned that the sector’s “immense” energy demands require major upgrades to global infrastructure.
As part of its expansion, Google announced a £5 billion investment in the UK over two years, including a new data center and expanded funding for DeepMind. The company will also begin training next-generation AI models in the United Kingdom, in support of the country’s push to become a global AI superpower.
With speculation rising about the launch of Google’s next major model—Gemini 3—market watchers say the coming months will reveal whether the rapid acceleration of AI spending reflects real long-term value or the early signs of an AI bubble ready to burst.
