A.I. is a $1 trillion investment opportunity but will be ‘biggest bubble of all time,’ CEO predicts
Emad Mostaque, founder and CEO of Stability AI, speaks during the Bloomberg Technology Summit in San Francisco, California, US, on Thursday, June 22, 2023.
David Paul Morris | Bloomberg | Getty Images
Artificial intelligence will be the biggest bubble of all time, according to the CEO of open-source AI company Stability AI.
Speaking with UBS analysts on a call last week, Stability AI CEO Emad Mostaque said of artificial intelligence: “I think this will be the biggest bubble of all time.” He added that it is still at the very early stages and not ready for mass-scale adoption in industries like banking just yet.
“I call it the ‘dot AI’ bubble, and it hasn’t even started yet,” he said.
Stability AI is the company behind Stable Diffusion, one of the other more popular generative AI tools aside from OpenAI.
Stable Diffusion allows users to generate photo-realistic images by inputting text. It has more than a million users and has raised over $100 million from investors including Coatue and Lightspeed Venture Partners.
Mostaque, its co-founder and CEO, has been accused of making misleading claims about his background, achievements, and partnerships. He disputed the claims one by one in a detailed response on his personal blog.
Generative AI has captivated the imagination of many an academic, boardroom executive, and even school student, for its ability to produce humanlike language and visual content from scratch in response to user prompts by using vast amounts of data.
AI has long been around, with the technology now a common feature of online browsing, social media platforms, and home assistants. Beyond consumer applications, the technology is being used in medicine, transportation, robotics, science, education, finance, defense, and other industries.
However, a more novel form of AI which has come about recently is generative AI, which is used in tools such as the popular AI chatbot ChatGPT, from U.S. tech firm OpenAI, as well as Google Bard and Microsoft Bing Chat, and image generators like Dall-E, Stable Diffusion, and Midjourney.
Mostaque said that the total amount of investment needed in AI was likely to be $1 trillion “because it’s more important than 5G as infrastructure for knowledge,” and suggested banks like UBS would have to adopt the technology as it is a “massive market.”
But, he added, it is at the “early stages” of development right now.
“It’s not quite ready” to be deployed at scale within large industries like financial services, “but we can see the value,” Mostaque said.
Mostaque said that companies that do not use AI appropriately in their businesses will be “punished” by the stock market.
He cited the example of Google, which lost $100 billion in a single day after its Bard AI chatbot gave inaccurate information in a promotional video upon its release. Google is competing aggressively with Microsoft to win in the race to build superior AI tools.
“I think this is real. I think that there aren’t many investable opportunities here, and you’ll see people moving from the best chip manufacturers to companies that are using this to impact their bottom line and their top line appropriately. And you will see the market punishing those that don’t use this,” Mostaque said.
“This will be one of the biggest investment themes over the next few years,” he added.
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CEO of Palantir Technologies Alex Karp attends the Pennsylvania Energy and Innovation Summit, at Carnegie Mellon University in Pittsburgh, Pennsylvania, U.S., July 15, 2025.
Nathan Howard | Reuters
It’s been a tough November for Palantir.
Shares of the software analytics provider dropped 16% for their worst month since August 2023 as investors dumped AI stocks due to valuation fears. Meanwhile, famed investor Michael Burry doubled down on the artificial intelligence trade and bet against the company.
Palantir started November off on a high note.
The Denver-based company topped Wall Street’s third-quarter earnings and revenue expectations. Palantir also posted its second-straight $1 billion revenue quarter, but high valuation concerns contributed to a post-print selloff.
In a note to clients, Jefferies analysts called Palantir’s valuation “extreme” and argued investors would find better risk-reward in AI names such as Microsoft and Snowflake. Analysts at RBC Capital Markets raised concerns about the company’s “increasingly concentrated growth profile,” while Deutsche Bank called the valuation “very difficult to wrap our heads around.”
Adding fuel to the post-earnings selloff was the revelation that Burry is betting against Palantir and AI chipmaker Nvidia. Burry, who is widely known for predicting the housing crisis that occurred in 2008 and the portrayal of him in the film “The Big Short,” later accused hyperscalers of artificially boosting earnings.
Palantir CEO Alex Karp vocally hit the front lines, appearing twice in one week on CNBC, where he accused Burry of “market manipulation” and called the investor’s actions “egregious.”
“The idea that chips and ontology is what you want to short is bats— crazy,” Karp told CNBC’s “Squawk Box.”
Despite the vicious selloff, Palantir has notched some deal wins this month. That included a multiyear contract with consulting firm PwC to speed up AI adoption in the U.K. and a deal with aircraft engine maintenance company FTAI.
But those announcements did little to shake off valuation worries that have haunted all AI-tied companies in November.
Across the board, investors have viciously ditched the high-priced group, citing fears of stretched valuations and a bubble.
In November, Nvidia pulled back more than 12%, while Microsoft and Amazon dropped about 5% each. Quantum computing names such as Rigetti Computing and D-Wave Quantum have shed more than a third of their value.
Apple and Alphabet were the only Magnificent 7 stocks to end the month with gains.
Sill, questions linger over Palantir’s valuation, and those worries aren’t a new concern.
Even after its steep price drop, the company’s stock trades at 233 times forward earnings. By comparison, Nvidia and Alphabet traded at about 38 times and 30 times, respectively, at Friday’s close.
Karp, who has long defended the company, didn’t miss an opportunity to clap back at his critics, arguing in a letter to shareholders that the company is making it feasible for everyday investors to attain rates of return once “limited to the most successful venture capitalists in Palo Alto.”
“Please turn on the conventional television and see how unhappy those that didn’t invest in us are,” Karp said during an earnings call. “Enjoy, get some popcorn. They’re crying. We are every day making this company better, and we’re doing it for this nation, for allied countries.”
Palantir declined to comment for this story.
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