The chance of a market correction in the artificial intelligence sector is “pretty high,” former Meta executive and British politician Nick Clegg warned on Wednesday, as he pushed back on the concept of artificial superintelligence.  

Clegg, the former deputy prime minister of the U.K. who went on to guide policy decisions at U.S. tech giant Meta, said the AI boom has resulted in “unbelievable, crazy valuations.”  

“There’s just absolute spasm of almost daily, hourly, deal making,” he told CNBC’s Arjun Kharpal for “Squawk Box Europe.”  

“You’ve got to think, wow, this could be headed for a correction,” he said, adding that the likelihood of such an event is “pretty high.”  

Bubbles are typically defined by inflated valuations across the private or public market, where the price of a company doesn’t match its fundamentals.  

A correction comes down to whether large hyperscalers — “who are pouring hundreds of billions of dollars into the ground and building these data centers” — can recoup their infrastructure investments and prove their business models are sustainable, Clegg said.  

“That’s obviously going to raise some issues,” he added, as is “the fundamental paradigm on which this whole industry is built, the so-called large language model AI paradigm.”  

Many high-profile tech chiefs and investors have backed the idea of artificial superintelligence, including SoftBank founder Masayoshi Son and Meta CEO Mark Zuckerberg, the latter of which created an AI lab to pursue the technology earlier this year.  

“I think there are certain limits to that probabilistic AI technology, which means that it won’t perhaps be quite as all singing and all dancing as people suggest,” Clegg added. “But it doesn’t mean that technology itself is not going to persist, it’s not going to flourish and is not going to have a huge effect.” 

Indeed, Clegg’s former employer Meta emerged from the dot-com era bubble and is today one of the world’s largest companies. Amazon and Google charted a similar course, showing that a bubble bursting does not always mean the end of a company.  

It’s a common adage in venture capital that the best companies are built in a downturn or tough funding environment, often due to investors watching their bottom line more closely and putting greater emphasis on sound business metrics when making investment decisions. This forces business leaders to operate more efficiently, with those who can do more with less funding likely outliving competitors.  

Clegg’s stance mirrors that of other investors and tech leaders, who believe a bubble is emerging, but it doesn’t mean that AI isn’t here to stay.  

The pile-in has created an “industrial bubble” but “AI is real, and it is going to change every industry,” Jeff Bezos told a crowd at Italian Tech Week earlier this month.  

There is low-hanging fruit where AI can be applied quickly, but society at large will adopt the technology more slowly, according to Clegg. 

“There’s a lot of hype. People in Silicon Valley assume that if you invent a technology on Tuesday, everybody’s going to use it on Thursday. It’s not actually how it works at all,” he said. 

“It took 20 years for all of us to get onto desktop computing after desktop computing was technologically feasible. So, I think it’s the pace that is the thing to look out for. That will vary sector from sector to sector, country by country, but I think it might be just a little bit slower than some of the technologists themselves are predicting at the moment,” he added.  

Taiwan Semiconductor Manufacturing Company on Thursday reported a 39.1% increase in third-quarter profit from last year, hitting a fresh record as demand for artificial intelligence chips stayed strong.

Here are the company’s results versus LSEG SmartEstimates:

• Revenue: NT$989.92 billion new Taiwan dollars, vs. NT$977.46 billion expected
• Net income: NT$452.3 billion, vs. NT$417.69 billion 

TSMC’s revenue in the September quarter rose 30.3% from a year ago to NT$989.92 billion, beating estimates.

TSMC’s high-performance computing division, which encompasses artificial intelligence and 5G applications, drove third-quarter sales.

As Asia’s largest technology company by market capitalization, TSMC has benefited from the artificial-intelligence megatrend as it manufactures advanced AI processors for clients, including Nvidia and Apple.

TSMC said advanced chips, with sizes 7-nanometer or smaller, accounted for 74% of TSMC’s total wafer revenue in the quarter. 

In semiconductor technology, smaller nanometer sizes signify more compact transistor designs, which lead to greater processing power and efficiency. 

Regulators in the U.S. have moved to block one of Hong Kong’s largest telecommunications companies from accessing domestic networks, citing national security concerns.

The U.S. Federal Communications Commission announced on Wednesday that it had initiated proceedings to potentially bar HKT Trust and HKT Ltd and its subsidiaries from interconnecting with American networks, escalating concerns over its ties to China. 

The government agency asked HKT, which is a subsidiary of information and communication technology giant PCCW, to justify why its authorizations should not be revoked.  HKT’s current hold permits allowing direct exchange of calls and data with U.S. carriers.

China Unicom, which owns about 18.4% of PCCW, lost its own U.S. network access in 2022 due to similar concerns.

“The FCC’s action on HKT today is an appropriate step towards ensuring the safety and integrity of our communications networks,” FCC Chairman Brendan Carr said in a statement. 

“The FCC will continue to safeguard America’s networks against penetration from foreign adversaries, like China.“

The Hong Kong-listed shares of HKT fell more than 5%, while PCCW fell 3.6% in Thursday trading.

According to their 2024 annual reports, HKT and PCCW derived about 13% of their 2024 revenues from regions outside greater China and Singapore, though specific countries weren’t detailed. HKT made up about 90% of the group’s total revenue.

Neither PCCW nor HKT immediately responded to CNBC’s requests for comment.

Under the leadership of Carr, the FCC has expanded efforts to expel Chinese state-linked entities, including China Telecom, Pacific Networks and ComNet, from U.S. markets.

On Friday, the FCC announced that the major U.S. online retail websites had removed millions of listings for banned Chinese electronics as part of its broader China crackdown.

FWD Group, owned by Li’s Pacific Century Group, recently faced hurdles expanding into mainland China amid backlash from regulators in China, Bloomberg reported in July.

In March, Beijing reportedly instructed state-owned firms to pause new deals with businesses linked to Li Ka-shing and his family after their conglomerate CK Hutchison agreed to transfer stakes in over 40 global ports — including two in Panama — to a BlackRock-led consortium. 

The ports deal stalled after Beijing objected to the exclusion of Chinese investors, with CK Hutchison indicating it no longer plans to comeplete the transaction in 2025.

The FCC’s latest move against HKT also comes as U.S. President Donald Trump escalates his trade war with China.