Texas is ready to invest heavily in AI and crypto currency.
The author suggests that it shouldn't, or at least be realistic in its expectations.
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Artificial intelligence is overhyped and overvalued in a classic financial bubble, experts at the South by Southwest Conference and Festivals warned, setting the stage for a tech bust that could wipe out tens of billions of dollars in investments.
Over three days at SXSW, I heard venture capitalists, electric grid experts and data scientists question whether artificial intelligence services can live up to the hype. More importantly, AI business people warned that potential customers are unwilling to pay what it costs to generate AI.
“There hasn’t been a really good sign or even a really good objective proof of a good sustainable product that a consumer is willing to spend the amount of money that developers are actually spending to build that product,” explained roboticist Kartik Tiwari, co-founder of Andromeda Surgical, who has worked on developing AI for medicine and self-driving trucks.
Investors have a long history of pouring money into new technologies in hopes of making a fortune. The venture capital industry is built on turning promising innovations into commercial products.
Raising money requires enthusiastic marketing, and dumb money frequently chases the newest shiny objects creating a financial bubble. The subsequent bust often triggers economic recessions.
The most famous is the dot-com bubble around web-based businesses that started in 1995. When it burst in 2000, the tech-heavy Nasdaq crashed 77%, destroying billions of dollars in savings.
The hype around AI has created a similar bubble, with associated companies attracting astronomical valuations and eye-watering stock prices. Cheerleaders promise it will add $15.7 trillion to the global economy by 2030. However, so much money has moved into AI-associated businesses experienced venture capitalists are getting nervous that company earnings cannot keep up with expectations.
James Wang, a general partner at venture capital firm Creative Ventures, said many VC-backed companies are lowering valuations and taking losses because the companies are earning lower-than-expected revenues. He warned that earnings at companies traded on stock markets are losing money when adjusted for inflation.
- Related: Crypto-mining and artificial intelligence could raise Texas electricity prices 70% by 2030.
For more:
- Texas Legislature - Bills By Subject - General Subject Index: Artificial Intelligence.
- HB 1709: Relating to the regulation and reporting on the use of artificial intelligence systems by certain business entities and state agencies; providing civil penalties.
