While private AI companies have had a fine week (see the recent valuations of OpenAI and Databricks), publicly traded AI firms have hit some rough sledding.
Driving the news: U.S. tech shares tumbled again yesterday as investors continued to sell off shares of AI firms that had been absolutely killing it this year. The slide comes amid renewed investor fears that their enormous AI investments might not pay off.
- The fear was partly stoked by a new MIT report, which found that 95% of organizations are getting zero return on their investments in generative AI.
- Recent comments by Sam Altman also induced panic, with the OpenAI CEO saying that he thinks “some investors are likely to lose a lot of money… [and] that sucks.”
Big picture: AI chipmakers like Nvidia and AMD are two notable names caught in the mix, with shares falling 2.5% and 8.1%, respectively, between August 14 and August 20. The biggest loser though is data mining software provider Palantir, shares of which dropped six days in a row.
- Since hitting a record high last week, shares have been subject to serious market correction, falling by over 16%. Take this as another example of why not to trust Jim Cramer.
Why it matters: Experts are split on whether there’s an AI bubble, with some assuring that things aren’t as absurd as the dot-com bubble, as many of these listed firms are profitable and not entirely speculative. That said, the jitters associated with a bubble are present.—QH