It is rare in the world of tech giants for the CEO of a company gaining 46 per cent on the stock market this year to publicly invoke the spectre of the ‘irrational euphoria’ of the dotcom bubble era. However, Sundar Pichai, Alphabet’s CEO, opted for this surprising act of candour in an interview with the BBC. Although investors are still aggressively betting on Google’s ability to compete with OpenAI, Pichai admits straightforwardly: there are elements of irrationality evident in the market, and in the event of a correction, no company – including Google – will emerge unscathed.
Pichai’s words come at a time when US technology company valuations are beginning to weigh on broader indices, and analysts are increasingly asking loudly about the viability of giant investments in artificial intelligence. While Alphabet’s chief executive believes his company will weather the potential storm, his caution contrasts with the company’s aggressive investment strategy. Google is not slowing down, as evidenced by its investment commitment in the UK announced in September. The conglomerate plans to spend £5 billion on infrastructure expansion, including new data centres and funding for London’s DeepMind lab.
This move has not only a technological dimension, but also a geopolitical one. The start of training AI models in the UK fits in with Prime Minister Keir Starmer’s ambition to make the UK the third superpower in artificial intelligence after the US and China. However, this technological arms race comes at a price, which the industry is reluctant to talk about. Pichai confirmed that the ‘huge’ energy demands of the new infrastructure will force a delay in Alphabet’s climate targets. Achieving net-zero emissions is slipping, giving way to the need for the computing power required to maintain leadership.
Pichai’s statement is a clear signal to the market: Google is ready for the long march and the costs – both financial and environmental – but management in Mountain View realises that the current bull market is based on fragile foundations. The question is no longer whether the market is overheated, but how deep the correction will be when investor sentiment finally cools down.
