Ken Griffin, founder of Wall Street giant Citadel, said Tuesday that investors are “almost certainly” in an AI bubble, although he wasn’t telling them to abandon their AI stocks.
“What’s left in the wake of these bubbles, if we want to use that term, is often a game changer for the world. And the companies that are on the other side of that bubble are the market leaders for decades to come,” Griffin said at Citadel’s Future of Global Markets conference in New York on October 20.
This goes beyond tech investors, as the development of AI has buoyed stock markets over the past year, with many index funds and retirement accounts owning a piece of it. A bubble is what happens when prices rise much faster than the companies behind them can justify, until reality catches up. Citadel is a hedge fund, a private company that invests money for wealthy clients and institutions.
But the fact that it looks like a bubble is not. that It’s a big deal if you look at the big picture, according to Griffin. “Any radical transformation of our economy is usually linked to a bubble,” he said, recalling the Internet boom and adding that he wishes he had held on to his Amazon shares.
Companies that emerge on the other side of a bubble tend to dominate markets for decades, he argued, although he did not predict a collapse. His own company is a case study: Griffin said AI agents, software that performs multi-step tasks on its own, reduced some high-level research on Citadel from weeks to hours.
Griffin compared GPUs, the graphics chips that many companies use to train and run AI models, to airplane seats. Both have a very low marginal cost of operation, meaning the additional expense of serving an additional customer is tiny, so prices can collapse once supply exceeds demand.
He pointed to the telecommunications boom around 2000, when companies laid more fiber-optic cable than demand demanded and communications prices plummeted. He also doubted that the five- or six-year-old chips, which still fetch rental rates he calls extraordinary, will continue to do so for another five or six years.
Buyers are increasingly picky, Griffin said, sorting out which jobs warrant OpenAI and Anthropic’s high-end models and which can run on cheaper open source alternatives, meaning anyone can download and run on their own computer. American companies have been uneven in extracting value from AI, he added, with companies studying their bills in the lab and wondering where the productivity is.
Gartner predicts that global spending on AI will reach nearly $1.5 trillion for 2025, counting everything from chips and servers to AI-enabled phones. Nvidia CEO Jensen Huang said at Davos in January that the industry had invested only “a few hundred billion dollars” in what he called the largest infrastructure build in human history, with billions still to be built. If customers are reluctant to accept higher prices, the chip and cloud computing companies that rely on such spending will feel it first.
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