Google CEO Sundar Pichai sees 'Elements of Irrationality' in AI investment boom

Google and Alphabet CEO Sundar Pichai has issued one of the clearest warnings yet about the sustainability of the massive, ongoing investment wave in Artificial Intelligence, stating that the booming market contains "elements of irrationality" reminiscent of the late 1990s dot-com bubble.

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In a recent interview, Pichai acknowledged that the current moment is an "extraordinary" period of technological transformation. However, he drew a direct parallel to the era of "irrational exuberance," noting that while the underlying AI technology is profound, the valuations and capital commitments risk overshooting economic reality.

The Dot-Com parallel: Profound technology, excessive Investment

Pichai’s caution comes as tech companies, including Google, are pouring billions into establishing AI infrastructure, driving up valuations for chipmakers like Nvidia and generating massive enthusiasm among investors.

He stressed that investment cycles can collectively "overshoot," but argued that the underlying technology is robust.

"We can look back at the internet right now. There was clearly a lot of excess investment, but none of us would question whether the internet was profound or fundamentally changed how we work digitally as a society. I expect AI to be the same." the CEO said in the exclusive interview with BBC News.

While arguing the technology itself is transformative, Pichai warned that a market correction similar to the 2000 dot-com crash, which wiped out jobs and saw widespread corporate failures, is a distinct possibility.

No company is immune

Moreover, the CEO dismissed the notion that established giants like Google are bulletproof if an AI bubble were to burst.

"I think no company is going to be immune, including us," Pichai stated, emphasizing that the fallout would ripple across the entire tech ecosystem. He added that while Alphabet's "full-stack" advantage positions it better to "weather the storm," the risk is systemic. The company is self-sufficient, controlling everything from specialized superchips (TPUs) to research (DeepMind) and consumer platforms.

OpenAI CEO Sam Altman has also previously warned that the industry may be showing signs of investor overexcitement, suggesting that someone is "going to lose a phenomenal amount of money."

The hidden costs: Energy and infrastructure

Pichai also highlighted the very real, immediate constraints fueling the investment frenzy: the "immense" energy needs of AI.

The computing power required to train and run large AI models is consuming vast amounts of electricity, a factor that Pichai admitted is already impacting Alphabet’s progress toward its ambitious 2030 net-zero emissions targets. The challenge, he said, is that governments and industry need to aggressively scale up energy production and grid capacity to avoid constraining economic growth based on energy supply.