Wherever C3.ai CEO Tom Siebel goes he fields the identical query about the way forward for AI.
“All people’s asking me about it, ‘Is there a bubble right here?’ Completely there’s a bubble. It’s large,” he tells Fortune in an unique interview at C3.ai’s New York workplaces in a Midtown WeWork.
Over the past two years, analysts have contemplated whether or not AI corporations, each private and non-private, might probably reside up to their lofty valuations. To Siebel, who constructed his profession in Silicon Valley as a gross sales govt at Oracle earlier than leaving to begin his personal firm that he ultimately offered again to his former employer for $5.8 billion, the present state of AI reminded him of the dot-com bubble. Even then an awesome and wondrous know-how—the web—couldn’t save a bunch of corporations from coming crashing down.
“So we’ve this comparable factor happening with generative AI that we’ve seen with earlier applied sciences,” Siebel stated. “The market is manner, manner overvaluing.”
Tech analysts that Fortune spoke to broadly agreed with Siebel’s level that valuations throughout the business had been inflated. “For now, just about each notable AI firm enjoys a good diploma of investor hype,” stated Sandeep Rao, senior researcher at Leverage Shares, a supplier of ETPs.
C3.ai makes a speciality of enterprise AI purposes that assist corporations with varied enterprise capabilities like optimizing their provide chain, predictive upkeep, and monitoring their gross sales course of. It additionally has a spate of profitable authorities contracts with the likes of the U.S. Division of Protection and the U.S. Air Drive. Amongst its largest non-public sector clients are oil and fuel large Shell and vitality firm Baker Hughes (whose contract is up for renewal quickly).
Earlier this week C3.ai added one other blue chip companion to its ranks when it introduced a partnership with Microsoft. Fortune’s interview with Siebel was carried out earlier than the partnership was publicly revealed. (Alan Murray the previous CEO of Fortune Media is on the board of C3.ai).
Particularly, Siebel took purpose at OpenAI, the startup with shut ties to Microsoft and that’s maybe most carefully related to the AI revolution. OpenAI at the moment has a $157 billion valuation after an October funding spherical during which it raised $6 billion. Siebel wasn’t impressed by that valuation.
“No one can be stunned if that firm disappeared subsequent Monday,” he stated.
When Fortune ventured that business observers can be stunned, Siebel responded that it had “disappeared” over Thanksgiving, a reference to the transient ouster of OpenAI CEO Sam Altman in 2023.
“If it disappeared, it wouldn’t make any distinction on the planet,” Siebel stated of OpenAI. “Nothing would change. I imply, no person’s life would change. No firm would change. Microsoft would discover one thing else to energy Copilot. There’s like 10 different merchandise obtainable that may do it equally nearly as good.”
The OpenAI model identify has cachet as a result of it was first to market, however that alone can’t assure its market place in perpetuity, stated Paul Marino, chief income officer at Themes ETF, an exchange-traded fund based mostly out of Greenwich, Conn. “Simply since you’re very well-known doesn’t imply which you can’t be copied, replicated, and possibly even surpassed,” Marino stated.
In Rao’s view, there are variations between giant language fashions, however they’re obscure. “LLMs are extremely proprietary and nailing down definitive distinctions isn’t straightforward,” he stated.
Their success, he added, is commonly due simply as a lot to their enterprise relationships as it’s to their underlying tech. “An LLM’s benefit isn’t essentially dictated by high quality however could possibly be dictated by low price boundaries and ease of use with present tech as a substitute,” Rao stated.
On this regard, OpenAI definitely suits the invoice, having established deep ties with Microsoft.
OpenAI didn’t reply to a request for remark concerning Siebel’s feedback.
Siebel sees overvaluations all through early stage AI startups as properly.
“There’s an extended record of AI startups out of Illinois, Wisconsin, Stanford, which are being financed at present on Sand Hill Street, the place little or no concepts by people who find themselves extremely inexperienced, who’re going to construct generative AI purposes for dentist workplace, veterinarians, or divorce attorneys and these concepts are being financed at multi-billion greenback valuations,” Siebel stated. They’re “simply 5 individuals who don’t know something [with] 4 pages of a marketing strategy. That is loopy.”
Over the previous few years, a spate of AI startups with extremely particular use instances has cropped up, a few of which have certainly offered or raised cash at giant valuations. Their observe data have been a combined bag. In August 2023, Casetext, which makes a speciality of AI for authorized work, offered to Thomson Reuters for $650 million. JasperAI, a startup centered on AI for advertising and marketing departments, raised $125 million at a $1.5 billion valuation in a Sequence A in June 2023 solely to reduce its inner valuation three months later, in accordance with The Info.
Exempt from Siebel’s criticism are the main tech giants creating their very own suite of AI merchandise. Microsoft and Amazon, he stated, are “nice corporations” that aren’t overvalued. Neither are chipmakers Nvidia and TSMC. “If TSMC went out of enterprise it will be the top of the world,” he stated.
When requested the place C3.ai belongs, Siebel naturally has no doubts. “C3.ai is a discount, okay? I imply, it’s a price inventory buddy,” he stated.