Silicon Valley CEO compares AI to the dot-com bubble, says OpenAI could vanish

Tom Siebel, CEO of C3.ai, warns that the AI market, worth billions, is in a bubble like the dot-com era, with companies like OpenAI, valued at $157 billion, getting funding based more on hype than real innovation.

In an interview with Fortune, Tom Siebel, the CEO of C3.ai, shared the current state of artificial intelligence (AI), likening it to the dot-com bubble of the late 1990s. Siebel said, “People keep asking me, ‘Is there a bubble?’ Yes, there is, and it’s huge.”

Siebel compares AI market to dot-com bubble

Siebel, who built his career at Oracle before Silicon Valley, pointed out the parallels between today’s AI market and the dot-com era. Back then many overvalued companies collapsed. “We have this similar thing going on with generative AI that we’ve seen with previous technologies,“ Siebel said. “The market is way, way overvaluing.”

According to Siebel, the AI sector is witnessing inflated valuations in both public and private markets. Sandeep Rao, senior researcher at Leverage Shares said noting that “virtually every notable AI company enjoys a fair degree of investor hype.“

OpenAI, is valued at $157 billion after raising $6 billion in October. He was not appreciated by the startups saying, “Nobody would be surprised if that company disappeared next Monday.“ He referenced OpenAI CEO Sam Altman during Thanksgiving in 2023, adding, If Open AI disappeared, it wouldn’t make any difference in the world. Nothing would change and there won’t be any impact. It shows the value and need of the company.

Siebel said that OpenAI’s current success is mostly because it was the first to enter the market, not because of any unique technology. “Microsoft would find something else to power Copilot,“ he said. About ten other products available in the market would do it equally as well.“

Paul Marino, chief revenue officer at Themes ETF, agreed Siebel’s on OpenAI, by saying “Just because you’re very well-known doesn’t mean that you can’t be copied, replicated, and maybe even surpassed”.

There are many AI startups coming out of places like Illinois, Wisconsin, and Stanford, getting funding on Sand Hill Road, Siebel said. “Most of them have very basic ideas, created by inexperienced people, aiming to make AI tools for things like dentist offices, vets, or divorce lawyers. Yet, these startups are being valued at billions of dollars, even though they’re just a small team with a short business plan. It’s ridiculous.”

He just criticized the companies who adopted AI as a technological upgradation. Truth is AI has been publicly presented as unstoppable. In this stage of technology growth, companies push to embed new tech into systems even if it’s not fully ready. This integration makes it hard to remove, which allows even flawed technologies to become permanent.

Only strong AI companies will survive the hype

During a bubble, Siebel said that not all AI companies would survive the current hype. He noted that only companies with right business models and proven technologies would survive. He excluded major tech players like Microsoft, Amazon, and chipmakers Nvidia and TSMC from his criticism, calling them “great companies“ that aren’t overvalued. “If TSMC went out of business, it would be the end of the world,” he added.

When asked about his own company he said, “C3.ai is a great deal. It’s a value stock.” He believes it’s a reliable and undervalued contender in the AI market.

Siebel warned about the risks of overvalued AI companies and stressed the need for realistic investments. While he didn’t suggest specific fixes, he pointed out the importance of focusing on practical uses and building strong, sustainable businesses.

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