'AI industry is in a bubble' warns Google DeepMind co-founder
by Bronwyn Thompson · New AtlasThis week, talk of the AI industry bubble has heated up, with Google's top executive Demis Hassabis throwing some fuel on this fire while discussing the release of the company's much-anticipated Gemini 3 model.
Speaking to podcast Hard Fork hosts Kevin Roose and Casey Newton, the chief executive officer and co-founder of Google DeepMind and Isomorphic Labs echoed what colleague Sundar Pichai – CEO of Google parent Alphabet – also said of the seemingly unsustainable AI industry.
"Are we in an AI bubble?" host Kevin asked candidly, to which Hassabis chuckles and pauses to consider his response.
"It's too binary a question, I would say," Hassabis replied. "My view on this – this is just strictly just my own opinion – is that there are some parts of the AI industry that are probably in a bubble. If you look at seed investment rounds being multi-ten-billion-dollar rounds with basically nothing, it seems ... there are talented teams, but it seems like that might be the first signs of some kind of bubble."
In a similarly timed interview, Pichai warned that even the biggest players, like Alphabet and all its subsidiaries like Google DeepMind, will feel it.
"I think no company is going to be immune, including us," he told the BBC.
And while the AI bubble is a hot topic as the end of 2025 nears – a year that's seen unprecedented investment and valuations of companies like Alphabet, Nvidia and OpenAI – it's not all doom and gloom.
"I think there's a lot of amazing work value to – at least from our perspective that we see – not only all the new product areas, like Gemini app, NotebookLM, and thinking more forward, robotics, gaming," Hassabis pivoted. "And drug discovery we're doing with Isomorphic, and Weymo. So there are all these new 'greenfield' areas. They're going to take a while to mature into massive multi-hundred-billion-dollar businesses, but I think there's actually potential for half a dozen to a dozen there, that I think Alphabet will be involved with, which I'm really excited about."
It's no secret that many companies in the field are operating at a loss right now – OpenAI has reportedly hemhoraged US$14 billion in this quarter alone – but the DeepMind boss remains optimistic.
"Immediate returns – this is the engine room part of Google, where we're pushing this into all of these incredible multi-billion-user products that people use every day. We have so many ideas, it's just about execution," he added. "I think a lot of that will also bring in near-term revenue and direct returns, while we're also investing in the future.
"I feel really good were we are, as Alphabet, whether there's a bubble or not," he continued. "Our job is to be winning in both cases, right? If there's no bubble and things carry on, then we're going to take advantage of that opportunity. But if there is is some sort of bubble and there's a retrenchment, I think we'll also be best-placed to take advantage of that scenario."
An easy comparison of where we're at is the dot-com era, during which countless startups were valued on good vibes alone, with just the promise of financial returns on investments in the future. Then everything unraveled in 2000, wiping out many of these companies and tech sector jobs, and contributing to a US recession in 2001 – a brief one, but still one.
Now, there are valid concerns that the AI industry – one built on unprecedented investment without adequate financial returns – may follow a similar trajectory. This year has seen some of the market leaders greatly increase in value: Alphabet has reached a valuation of $3.5 trillion, OpenAI has reportedly hit a $500-billion valuation, and NVIDIA has become the first company to ever surpass the $5-trillion mark.
This month, however, some big investors are seemingly getting nervous. Nvidia lost big investments from serious players like Peter Thiel's hedge fund, which took back the $94 million it had put on the line, and money manager Michael Burry is now betting against the semiconductor company as well as Thiel's data-mining firm Palantir, predicting the stocks will continue to fall. Burry made a reported $100 million by predicting the 2007 subprime mortgage crisis which led to the great recession the following year (and inspired the book and then the film The Big Short).
Pichai told the BBC that current AI spending was experiencing an "extraordinary moment" but conceded there are now "elements of irrationality" in the market that are reminiscent of the "irrational exuberance" that investors had during the dot-com hype.
Right now, it seems Hassabis' position is a reasonable one: there's most likely bubble, and if a burst does come, it's most likely going to thin out the crowded AI industry and hit the tech employment sector immediately. And former International Monetary Fund chief economist Gita Gopinath believes such a crash – like the dot-com implosion – would wipe out $20 trillion from US households and $15 trillion from worldwide investors. However, on the other side of the pain – like in 2001 – the AI industry should emerge as a more sensible and less speculative business. And like the internet, AI is here to stay – as are the huge companies like Alphabet, which continues to focus on diverse areas of product development.
Hassabis made history in 2024, when he, along with creative partner and DeepMind director Dr. John Jumper, shared the Nobel Prize in Chemistry for their work developing AlphaFold, the AI system that predicts the 3D structure of proteins from their amino acid sequences.
This week, Nature detailed the future of DeepMind and the company's focus on science-based development, which is certainly worth a read.
As for Gemini 3 – yes, it's a big deal, but many of its tools are yet to be rolled out, and access to the launch model is staggered across platforms in the US. So check out the video below for more.