Ken Griffin: AI Boom Looks Like a Bubble - Briefs Finance

Griffin's warning about AI hype

Ken Griffin spoke plainly: the rapid rise of artificial intelligence (AI) "almost certainly" looks like a bubble. He said this while talking with Bloomberg's Dani Burger at Citadel's yearly Future of Global Markets Conference in New York.

He explained that major changes in technology often happen alongside periods of risky investing. He said, "Any radical transformation of our economy is generally intertwined with a bubble," and, "These bubbles, if we want to use that word, often coincide with these giant technological transformations." He also looked back at the dot-com era, when people had overly hopeful business plans. He said, "The companies that are on the other side of that bubble are the market leaders for decades to come," then admitted, "I just wish I'd kept my Amazon stock in that moment."

What companies are struggling to figure out

Griffin said many business leaders still do not know how much AI will ultimately cost or how it will change business growth. In recent weeks, investors have become more worried that companies' large early investments in AI may take longer than expected to lead to higher profits and better productivity.

"Corporate America has been very uneven in its ability to extract value from its AI models," he said. He noted that finance teams looking at bills from Anthropic and OpenAI are asking, "Okay, we need to think about how to make sure we're getting productivity out of this."

Anthropic's plan to go public and the huge cost of AI

Anthropic is expected to take steps toward listing its shares on a U.S. stock market in the coming weeks. This could become one of the biggest first-time stock offerings, helping the company raise money to develop new and better AI models. The money would help pay for computer chips, more data center space and skilled workers.

According to the Wall Street Journal, Anthropic could spend $750 billion on more computing power over the coming years. Griffin also said the company's long-term success will depend on proving to investors that its AI models are essential tools for businesses in every industry.

How Griffin's views have changed and why markets care

Earlier this year in Davos, Griffin called AI "garbage." By May, when speaking at Stanford Business School, he said AI's abilities made him feel depressed. On Tuesday, he sounded much more positive about innovation in the United States, even as he warned that AI could disrupt jobs. "You're seeing the threat to white collar jobs playing out; as a business owner, you're seeing your competitive moats be filled in by bulldozers," he said. "At the same time, you're thinking that this will be a golden era for entrepreneurs."

The main point is that Griffin, who leads the hedge fund Citadel and the market-making firm Citadel Securities, sees signs of an AI bubble but also believes some companies could become long-term winners after it ends. For investors, this means telling the difference between the short-term costs of investing in AI and the long-term growth that using AI more widely could bring. Bubbles can burst, but companies that become market leaders during them can keep growing for decades.