A leading British tech investor has described soaring valuations of artificial intelligence companies as “disconcerting”, amid concerns of an AI stock market bubble.
Thank you for reading this post, don't forget to subscribe!James Anderson was an early backer of Tesla, Amazon and China’s Tencent and Alibaba, generating vast returns for Baillie Gifford’s flagship fund. Now at the Italian investment company Lingotto, Anderson said he had not seen signs of an investment bubble until recently, when the ChatGPT developer, OpenAI, and the rival Anthropic announced hefty valuation increases.
“Up until the last couple of months or so … what surprised me in one sense is that there wasn’t really much sign of a bubble [in AI],” he told the Financial Times.
OpenAI is reportedly in talks about a share sale that would value the startup at $500bn (£370bn), up from $300bn in April and $157bn last October. Anthropic almost trebled its valuation recently, going from $60bn in March to $170bn last month.
“I think one needs to be honest that those sudden increases [in valuation] that people were willing to place on OpenAI, Anthropic and the like were disconcerting,” he said. “That scale of jump and the pace with which it happened did bother me.”
Anderson also raised concerns about Nvidia’s investment of up to $100bn in OpenAI. Nvidia is a key player in AI infrastructure as a maker of the computer chips that are used in training and operating AI models, a position that has driven it to a stock market valuation of $4.5tn. Under the terms of the deal, OpenAI will pay Nvidia in cash for chips, and Nvidia will invest in OpenAI for non-controlling shares.
Some commentary around the deal has raised parallels with vendor financing, where a company provides financial support to a customer buying its products.
Anderson said he was a “huge admirer” of Nvidia but the OpenAI deal presented “more reason to be concerned there than before”.
Referring to a practice common in the turn of the millennium dotcom bubble, when telecom equipment makers lent money to customers, he said: “I have to say the words ‘vendor financing’ do not carry nice reflections to somebody of my age.
“It’s not quite like what many of the telecom suppliers were up to in 1999-2000 but it has certain rhymes to it. I don’t think it makes me feel entirely comfortable from that point of view.”
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Anderson is the managing partner of Lingotto’s innovation strategy fund. Lingotto is owned by the Agnelli family, which controls Ferrari, Juventus FC and the Economist.
Nvidia and OpenAI were approached for comment.
