AI investment exuberance reminds of dotcom craze

One of the interesting aspects of Open AI’s flip-flop over CEO Sam Altman is the financial angle. It was Altman who struck a deal with Microsoft and raised Open AI’s market value to $80 billion. When Altman was sacked by the now melted board of directors, Microsoft’s Satya Nadella offered Altman a job, and it was feared that Microsoft could pull back its investment in Open AI. But Microsoft-Open AI financial linkage is now being seen as a paradigm for the AI sector to expand aggressively and with the prospect of not generating apps indefinitely, and generating in turn trillions of dollars in profits. Amazon and Google have invested in Anthropic, an AI startup. There is the apprehension that the AI boom can go the way of dotcom bust at the turn of the 21st century. The boom-bust business cycle is a familiar economic phenomenon, though some over the board optimists believed the business cycle is no more relevant and that modern economies can maintain an ever increasing smooth momentum of growth and expansion. But the iron laws of business cycles seem to be waiting in the wings, only too ready to strike.

The danger facing the AI sector, like the one telecommunication networks faced more than a quarter century ago, is that of start-ups springing in every which way and getting market valuation in dizzyingly economic terms. And as no sector can live with overvaluation and delusions of quick fat earnings for too long, the inevitable crash follows. So the question is whether the AI is going the dotcom way. The answer is that the AI sector cannot sustain for too long the burden of unrealistic expectations.

The dotcom debris left behind is that the startups trimmed their wings in the course of time. There is little doubt that digital communication is in a vastly different  place in 2023 than it was in 1999. The world is much more digitised, but it grew at its own pace in different countries. So AI too will spread its wings but not at the blistering pace that the AI enthusiasts want it to grow. And it is also a fact that AI cannot be stopped in its tracks despite the large reservations of jurists, sociologists, social activists and part doomsayers. As the years go by, AI will lose its dreadful aspect of a monster holding humanity in captivity. It will become another device that became part of our daily lives like the microwave oven. It is the taming of the AI, intended by policymakers and its normalisation by usage on a massive scale in unconscious ways that will have a dampener effect on the investors. But it would seem that there is little chance of AI investors from turning sober. Hundreds of millions, and perhaps a few trillions, will be invested and lost before the lesson is learned. But the serious aspect is that of a few big players dominating the AI field because they have the money to invest and they have the economic muscle to keep the benefits of AI within the confines of its business sphere, and not allowing a larger number of people to have access to it. Microsoft wants the power of AI to be used for the company’s cloud program. It is but natural that people would want the fruits of AI to be made accessible to all. This is a technological challenge that people and countries face like the climate challenge, and it would require a global response.  Sam Altman had urged the US Congress earlier this year about the need to erect a regulatory framework around AI, and he had also expressed his apprehensions about the security measures needed to protect humanity from a footloose AI. The dangers of a monopoly or an oligopoly controlling the uses of AI are real, and it could lead to a dystopian tyranny of technology over humanity. Unfortunately, states with their inherent tendency to creat control systems can use AI for tyrannical ends. The corporates and states could even join hands with the corporates to set in place control systems over the people