Joe Lonsdale, the co-founder of Palantir Technologies Inc. (NASDAQ:PLTR) said the top brass in the artificial intelligence (AI) industry are underestimating the resources required to achieve their ambitious targets.
Continuous Cycle Every 3-6 Months
Lonsdale, who is also the founder of venture firm 8VC, warned about the creation of “a continuous cycle where executives look for more capital and energy every three to six months to power their initiatives”.
The Palantir co-founder on CNBC’s “Squawk Box” on Thursday, stated that the AI companies are “afraid to scare their investor,” hence downplaying their needs.
He added, “If anything, I think we’re underestimating how much investment is going to go into this space and how much we’re going to need.”
See Also: Microsoft On Path To $5 Trillion Market Cap: Analyst Says ‘AI Revolution Hits Next Gear’
Analysts Divided On AI Spending Boom
This concern comes at a time when tech giants like Meta Platforms Inc. (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), and Alphabet Inc.’s (NASDAQ:GOOGL) (NASDAQ:GOOG) Google have been ramping up their spending on data centers, GPUs, and AI infrastructure. The combined capex of these companies jumped 23% quarter-over-quarter and 85% year-over-year to nearly $80 billion in the September quarter.
Some Wall Street analysts have dismissed fears of a potential bubble in the AI sector. In a note titled "The AI Spending Boom Is Not Too Big," analysts from Goldman Sachs Group Inc., JPMorgan Chase & Co., and Wedbush Securities Inc. argued that the current AI investment levels are sustainable and could unlock an $8 trillion opportunity.
On the other hand, Mohamed El-Erian, the chief economic adviser at Allianz, issued a warning that investments in some AI-related names will "end up in tears," even as he categorized the boom as a "rational bubble." El-Erian argued that while AI is a "major transformational general purpose technology" akin to electricity, the current market frenzy is pulling weaker companies up alongside a "limited number of winners."
Price Action: On a year-to-date basis, AI ETFs Dan IVES Wedbush AI Revolution ETF (NYSE:IVES) and Cathie Wood‘s ARK Innovation ETF (BATS:ARKK) climbed 35.42% and 50.61%, respectively, as per data from Benzinga Pro.
READ NEXT:
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
