BIG TECH

Would the AI bubble be worth it?

What goes up must come down. 

AI investments and valuations have grown to astronomical heights, with VCs pouring a record $193 billion into AI firms this year, with most of that cash going to established startups. 

Amid the hype, many are questioning whether the industry is facing a bubble. Now, even some of AI’s biggest supporters have started to warn of the hype growing out of control. 

• On Friday, Amazon founder Jeff Bezos said at Italian Tech Week that AI is in an “industrial bubble,” with FOMO pushing investors to bet on both good and bad ideas. 

• Meta’s Mark Zuckerberg said in mid-September on a podcast that an AI bubble is "quite possible” given the sheer dollar amount being spent on the infrastructure buildout.

• OpenAI CEO Sam Altman warned of an AI bubble in August, comparing the current conditions to the dot-com bubble of 2000. 

However, one thing each of these tech leaders’ opinions has in common is that, despite the risks, the outcome will be worth it. 

Zuckerberg, for example, noted that he’d rather risk "misspending a couple of hundred billion" than being behind on superintelligence. Bezos, meanwhile, said that the benefits to society will still be “gigantic,” impacting “every industry.” And Altman said that, while investors are overexcited about AI, it’s “the most important thing to happen in a very long time.”

It’s clear that fears of a bubble are getting too big for tech leaders to ignore. Though their framing is that the risks are worth the reward, each of these firms has a lot riding on that being true. Meta has pledged to invest $600 billion in AI infrastructure through 2028, while Amazon has plans to spend $100 billion this year on enhancing AWS data centers. OpenAI committed billions to Project Stargate, not to mention that its entire business model relies on people adopting (and paying for) AI. 

Still, while the aftermath of a bubble of this caliber popping could be wildly detrimental to the economy, rest assured that the billionaires will be fine.

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CLOUD

Why AI firms are betting on neoclouds

With conventional cloud costs soaring sky high, alternatives are gaining traction. 

Neoclouds, or specialized cloud computing infrastructure primarily focused on GPUs for AI, are rapidly gaining popularity, as companies like CoreWeave, Nebius, Nscale and Lambda score billions in deals. 

• CoreWeave is a frontrunner among these companies, inking a $14.2 billion deal last week to provide cloud AI infrastructure to Meta. The deal came shortly after announcing its $6.5 billion agreement with OpenAI, bringing its total contract to $22.4 billion. 

• Also last week, Nscale announced two funding rounds: a $1.1 billion Series B, followed by an additional $433 million pre-Series C agreement. 

• Nebius, meanwhile, signed a multi-year deal worth up to $19.4 billion with Microsoft for AI compute in September.

• Lambda signed a $1.5 billion deal in recent weeks with Nvidia for the chip giant to lease back its own GPUs. The startup raised $480 million earlier this year and is currently in talks for another funding round at a valuation as high as $5 billion. 

While these deals might seem somewhat paltry compared to the hundreds of billions being thrown around by the likes of OpenAI, Nvidia, Oracle and Softbank, they represent that smaller AI developers are broadening their horizons beyond cloud hyperscalers.

“These neocloud providers are focusing on the unique needs of AI applications,” Trevor Morgan, chief operating officer of data storage firm OpenDrives, told The Deep View. 

Microsoft, which holds a large chunk of market share in cloud, has a total $33 billion in commitments to these neocloud firms. While it might look like Microsoft is sleeping with the enemy, investing in the competition could signal that Microsoft isn’t putting all its eggs in one cloud basket, said Morgan. 

“What part of the AI boom is going to hold out, versus how much of this is just building out of infrastructure and capabilities that maybe don’t support where business needs the technology to go?” said Morgan. “Nobody knows the real answer.”

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QUANTUM

Big Tech goes in on quantum

Google might be scaling its quantum efforts, but all roads lead back to AI.

The tech giant last week announced that Atlantic Quantum, an MIT-founded startup that develops quantum computing hardware, would join the Google Quantum AI unit. 

The move marks yet another push into quantum by a major tech firm: 

• In December, Google announced its Willow quantum computing chip, which performed a computation in just five minutes that would take supercomputers 10 septillion years. 

• In February, both Microsoft and Amazon followed suit, debuting their own quantum chips. Amazon also disclosed a $36.7 million stake in quantum firm IonQ in August. 

• IBM, which joined the quantum movement early, announced a partnership with chip firm AMD to build next-generation supercomputers that combine quantum architecture with AI computing. 

Quantum isn’t divorced from the AI hype, Brian Jackson, principal research director at Info-Tech Research Group, told The Deep View. In fact, AI and quantum computing complement each other.

AI can enhance quantum algorithms through reinforcement learning, and code generation models could also simplify the development of these algorithms, thereby accelerating their adoption, he said. Meanwhile, quantum's biggest strength is in optimization, so the tech “could provide a pathway to produce LLMs of frontier performance with less power,” he said. 

Still, quantum computers face several hurdles, the largest of which is error correction, which prevents these devices from scaling effectively. Reaching a point where these devices use as few resources as possible for error correction leaves more room for quantum AI calculations. However, “We're still a long way off from that reality,” Jackson noted.

LINKS

• Rumors are spreading that OpenAI is launching an “agent builder” today

• AI chip firm Cerebras withdraws plans for an IPO

• OpenAI acquires AI personal finance app Roi

• BlackRock in talks to acquire Aligned Data Centers for $40 billion

• OpenAI, Jony Ive struggle with technical issues on AI device planned to launch in 2026

• AI chip unicorn Groq to establish more than a dozen data centers next year

• Meta Superintelligence Labs reportedly adopt external tools for faster prototyping

• Ex-Databricks AI head Naveen Rao in talks to raise $1 billion for new startup

• OpenAI Codex CLI and Agents SDK: Tools that help developers create consistent, traceable and scaleable AI agents. 

• IBM Granite 4.0: Hybrid enterprise AI models that can run on cheaper GPUs at a lower cost. 

• Ovi: An open-source alternative to Google’s Veo 3 video generation model by AI firm Fal.

• Strix: An open-source AI hacking agent to locate security vulnerabilities and generate reports. 

• Vercel Domains: Find, register and manage domain names for startups, AI agents and more.

• Krisp AI Note Taker: AI-powered note taking tool to record, transcribe and provide summaries, available in 16 languages.

• Perplexity: Research Resident

• Amazon: Senior Applied Scientist, Privacy Engineering

• Lambda: Security Engineer, Detection and Response

• xAI: Brand Safety Engineering Lead, Ads

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