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The great chatbot bubble

NEW YORK – Microsoft has added about US$1.5 trillion to its market capitalization this year after the launch of ChatGPT. Nvidia has added about $640 billion. Overall, the market value of generative AI models has increased by several trillions of dollars. What is supposed to justify this kind of valuation?

Market research firms claim that the market for generative AI will reach $126.5 billion by 2031. That’s not a lot of revenue compared to the market valuation. Microsoft now sells at about 12 times sales, and that’s a natural monopoly.

Even if that estimate were correct, market valuations are three to five times higher than $126 billion of revenue would justify. And I don’t see how generative AI can throw off that level of revenue, not by an order of magnitude.

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