Concerns of a massive financial bubble rise among AI chip race - Cafeqa

Concerns of a massive financial bubble rise among AI chip race


The development of next-generation AI processors is the subject of a worldwide competition.

Sam Altman, CEO of OpenAI, has demanded an investment of $7 trillion.

Sam Altman’s request for a $5–7 trillion (€4.65–6.5 trillion) worldwide investment to develop stronger processors for the subsequent generation of AI platforms in early February was sure to make waves. The OpenAI CEO shocked many in the sector with the staggering figure—almost 25% of the US government budget—and left them speechless.


According to an article in the Wall Street Journal earlier this month, Altman is seeking to address some of the biggest problems in artificial intelligence. One of these problems is the severe lack of transistors and processors required to run big language models like ChatGPT, which is his company’s flagship product.

In order for artificial intelligence to surpass human intellect, the US entrepreneur has cautioned that even more powerful computers would be required. According to the business newspaper, Altman recently met with prospective investors in the UAE.


Massive investment requirements

“Asking for $7 trillion is just indecent,” said Pedro Domingos, an emeritus professor of computer science and engineering at the University of Washington, in an interview with DW. “It is an order of magnitude more than the entire chip industry has spent in its history.”

The value of the whole AI chip market is still significantly more than the $700 billion in funding that Altman would probably accept, according to Domingos. According to current estimates, the business might reach a value of almost $135 billion by 2030, according to the Canadian-Indian analytics company Precedence Research.

If the goal is for AI to surpass humans in every facet of intelligence, then Altman’s prediction may not be that far-fetched, according to others.

As of this writing, “Right now, ChatGPT4 is only text,” said Dylan Patel of SemiAnalysis, speaking to DW. What if, however, you supplement it with visuals, sound, and motorized tactile feedback? And suppose for a second that AI really does surpass humans in every way imaginable. Hundreds of billions—if not trillions—of money will be required for that.

Last week, OpenAI introduced a platform called Sora, which allows users to make high-quality short movies using only a line of text. This is just the latest indication of how quickly AI is advancing.

The AI chip competition is already heating up

The world’s most powerful governments, including those of the US, China, Japan, and a number of European nations, were already vying for a piece of the chip sector before Altman’s prediction was public.

In an effort to prevent Chinese companies from acquiring semiconductors developed in the United States, Washington has sanctioned Beijing for the last 18 months. Instead of limiting Beijing’s capacity to build sophisticated AI processing power, Domingos said the restrictions were “counterproductive.”

China may get US chips via a variety of middlemen. The author of “The Master Algorithm” made the observation that penalties like this push China to increase its domestic production and decrease its need on American semiconductors.

The US sanctions have given Chinese officials the confidence to increase investments in artificial intelligence chip manufacture.

China rapidly gaining ground

“China is subsidizing AI chips to the tune of $250 billion over the next decade to build a manufacturing supply chain and catch up,” he said. He said that among the world’s leading chip manufacturers, Taiwan, and in the competition for semiconductor design, which is now being won by US chip makers, China lags behind by two to three years.

Countries without massive tech companies like Microsoft (which supports Altman’s OpenAI) and Google (which introduced its own AI chip last year) may find it difficult to join the AI chip production fray.

“If Germany wants to be a leader in AI, they’re going to have to subsidize it because the likes of Mercedes Benz and Daimler are not necessarily going to invest a ton on advanced chips,” Patel pointed out.

Superior chips a “commodity for strategic use”

The author of the book “Chip War,” Chris Miller, an economic historian, recently told DW that more nations are beginning to see ultra-high-speed chips as a “strategic commodity” in light of the present geopolitical impasse between global powers.

“Will be quite sensitive about where the chip plants are located and who’s involved in their production”—his prediction—in order to prevent authoritarian nations like China from abusing artificial intelligence (AI) for evil aims.

NVIDIA at the forefront of stock market meltdown

There is no AI chip design company more dominant than NVIDIA. The Santa Clara, California-based corporation is currently the third-largest on the US stock market, after AMD and Intel, with a valuation of $1.8 trillion.

The stock market meltup, in which investors’ euphoria drives fast market growth, has caused NVIDIA’s valuation to surge by $296.5 billion in the last month alone, a figure that most experts believe is unsustainable.

Domingos compared the present AI investment frenzy to a “balloon that is inflating very rapidly,” which would eventually burst.

There will be massive financial losses for many individuals, businesses, and nations. “A lot of blood will be shed,” he warned DW. But eventually, AI will function similarly to the Internet. These days, who gives a hoot about the dotcom bust? Internet technology is here, it is ubiquitous, and it will form the backbone of future technological developments.

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