Investors Warn: AI Valuations Remind of the Dot-Com Bubble

One of the most prominent British technology investors, James Anderson, has warned of a concerning rise in valuations in the field of artificial intelligence. His doubts have been further fueled by Nvidia’s planned $100 billion investment in OpenAI, which, he says, evokes memories of the inflated dot-com bubble of the late 1990s, as reported by the Financial Times.

Anderson built his career on early investments in Nvidia, Tesla, and Amazon, transforming the Edinburgh-based investment firm Baillie Gifford into an unexpected leader in technology investments. After returning to active investing in 2023, with the support of the Italian Agnelli family, he leads the $1.1 billion Lingotto Innovation Strategy alongside partner Morgan Samet from New York.

Until recently, Nvidia was the fund’s largest position, but it has now been surpassed by the Chinese battery manufacturer CATL. Lingotto has reduced its stake in Nvidia this year, while CATL’s stock has surged following its listing on the Hong Kong stock exchange.

– Until a few months ago, I did not see signs of a bubble in the AI sector, but the sudden jump in OpenAI’s valuation, which has soared from $157 billion to $500 billion in less than a year, and Anthropica, whose value has tripled to $170 billion in the last six months, is hard to ignore – stated Anderson.

He added that he remains a ‘big fan of Nvidia’, but that the announced investment in OpenAI, which is also one of the largest buyers of Nvidia’s AI systems, raises additional questions. Numerous critics, writes the FT, warn of a circular investment structure, as well as uncertainties surrounding the financing and powering of the gigantic data centers planned by Sam Altman.

– I must say that the term ‘vendor financing’ does not evoke pleasant memories for someone my age – said Anderson, recalling the practice from the dot-com bubble era when telecom equipment manufacturers leveraged their own balance sheets to help customers finance network expansions.

– It is not exactly the same as what happened in 1999 and 2000, but it is reminiscent of that. And I cannot say that I feel comfortable about it – he added.

Lingotto Investment Management, which was established under the auspices of Exora, the holding company of the Agnelli family, will announce the establishment of an innovation council at this year’s Italian Tech Week aimed at increasing entry into early-stage investments. Among others, it will include Dylan Field, CEO of Figma, Kim Branson, head of AI at pharmaceutical company GSK, and renowned venture capitalist Mike Volpi.

– In the era of the AI supercycle and advancements in the real economy, you need to enter earlier to understand what is coming – stated Samet, announcing investments from the seed stage all the way to companies going public. He is particularly optimistic about autonomous vehicles and the application of artificial intelligence in healthcare.

At the conference in Turin, Anderson, Samet, and Volpi will also speak, alongside John Elkann, CEO of Exora and chairman of Stellantis, together with Amazon founder Jeff Bezos.

Anderson’s cautious statements about Nvidia represent a significant shift from last year when he stated that ‘the most optimistic scenario could lead to a market capitalization expressed in double-digit trillions’. It is worth noting that Nvidia is currently valued at $4.4 trillion.

In his personal views, he also reflected on U.S. policy, warning that attempts by the Donald Trump administration to decouple the economy from China and limit investments in renewable energy could have devastating consequences for the energy and automotive sectors.

– If I go to America in ten years, it will somewhat resemble Cuba. You will have one extremely advanced sector – technology – but also an automotive industry that will look like it did 30 years ago and an energy system that is completely unreliable and far below what is happening in the rest of the world – concluded Anderson.