James Ferguson, founding partner of the UK-based macroeconomic research firm MacroStrategy Partnership, expressed skepticism about the current AI boom during an episode of the podcast Merryn Talks Money with Bloomberg reporter Merryn Somerset.
“These historically end badly,” Ferguson remarked. “Anyone who’s sort of a bit long in the tooth and has seen this sort of thing before is tempted to believe it’ll end badly.”
Ferguson argued that AI remains “completely unproven” and, if unreliable, effectively “useless.” He highlighted the issue of AI hallucinations, where systems generate incorrect or misleading information presented as fact.
Concerns About Nvidia’s Valuation
Ferguson also suggested that Nvidia, a leading AI computing chip producer, might be overvalued, akin to dominant companies during the dot-com era. He questioned Nvidia’s long-term viability despite its current rapid growth.
“What multiple of sales is Nvidia a good deal on if you think that it might only have—no matter how stratospheric the growth rate at the moment—if you think that it’s probably not going to be a player in a decade’s time?” he said.
He pointed out the rising costs associated with running Nvidia’s chips on servers, making the technology expensive and yet to prove its worth outside of narrow applications. When contacted by Newsweek, an Nvidia spokesperson declined to comment.
Echoing Concerns from Roger McNamee
Roger McNamee, a prominent venture capitalist and investor, echoed similar concerns to CNBC. Citing a recent Goldman Sachs report, McNamee warned that capital expenditure (capex) for AI is too high given the lack of high-value use cases.
“The amount of capital investment in this sector, which is billions of dollars now, it’s so large that it’s almost unimaginable that we’re going to get a rate of return on it over the next few years that justifies the amount invested already, much less what they’re putting in,” he said.
McNamee described the current “mania” around AI stocks as profitable but based on unproven assumptions about AI’s capabilities. He advised investors to reconsider their positions and evaluate whether AI products will deliver sufficient value to justify the investments made.
Future Uncertainty and Potential Disruption
McNamee acknowledged that something of great value could still emerge from the AI industry, though it might differ from current expectations. He urged investors to prepare for potential disruptions and a longer timeline for AI to prove its worth, with different winners and use cases emerging over time.