Wherever C3.ai CEO Tom Siebel goes he fields the identical query about the way forward for AI.
“Everybody’s asking me about it, ‘Is there a bubble here?’ Absolutely there’s a bubble. It’s huge,” he tells Fortune in an unique interview at C3.ai’s New York workplaces in a Midtown WeWork.
During the last two years, analysts have contemplated whether or not AI corporations, each private and non-private, might presumably stay 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 start out 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 number of corporations from coming crashing down.
“So we have this similar thing going on with generative AI that we’ve seen with previous technologies,” Siebel mentioned. “The market is way, way overvaluing.”
Tech analysts that Fortune spoke to broadly agreed with Siebel’s level that valuations throughout the trade had been inflated. “For now, virtually every notable AI company enjoys a fair degree of investor hype,” mentioned Sandeep Rao, senior researcher at Leverage Shares, a supplier of ETPs.
C3.ai focuses on enterprise AI functions 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).
Specifically, 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 present has a $157 billion valuation after an October funding spherical by which it raised $6 billion. Siebel wasn’t impressed by that valuation.
“Nobody would be surprised if that company disappeared next Monday,” he mentioned.
When Fortune ventured that trade observers can be stunned, Siebel responded that it had “disappeared” over Thanksgiving, a reference to the temporary ouster of OpenAI CEO Sam Altman in 2023.
“If it disappeared, it wouldn’t make any difference in the world,” Siebel mentioned of OpenAI. “Nothing would change. I mean, nobody’s life would change. No company would change. Microsoft would find something else to power Copilot. There’s like 10 other products available that would do it equally 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, mentioned Paul Marino, chief income officer at Themes ETF, an exchange-traded fund based mostly out of Greenwich, Conn. “Just because you’re very well known doesn’t mean that you can’t be copied, replicated, and maybe even surpassed,” Marino mentioned.
In Rao’s view, there are variations between massive language fashions, however they’re obscure. “LLMs are highly proprietary and nailing down definitive distinctions isn’t easy,” he mentioned.
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 advantage isn’t necessarily dictated by quality but could be dictated by low cost barriers and ease of use with existing tech instead,” Rao mentioned.
On this regard, OpenAI definitely suits the invoice, having established deep ties with Microsoft.
OpenAI didn’t reply to a request for remark relating to Siebel’s feedback.
Siebel sees overvaluations all through early stage AI startups as nicely.
“There’s a long list of AI startups out of Illinois, Wisconsin, Stanford, that are being financed today on Sand Hill Road, where very little ideas by people who are highly inexperienced, who are going to build generative AI applications for dentist office, veterinarians, or divorce lawyers and these ideas are being financed at multi-billion dollar valuations,” Siebel mentioned. They’re “just five people who don’t know anything [with] four pages of a business plan. This is crazy.”
Over the previous couple of years, a spate of AI startups with extremely particular use circumstances has cropped up, a few of which have certainly offered or raised cash at massive valuations. Their observe data have been a combined bag. In August 2023, Casetext, which focuses on 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 Collection A in June 2023 solely to reduce its inside valuation three months later, in accordance with The Data.
Exempt from Siebel’s criticism are the key tech giants creating their very own suite of AI merchandise. Microsoft and Amazon, he mentioned, are “great companies” that aren’t overvalued. Neither are chipmakers Nvidia and TSMC. “If TSMC went out of business it would be the end of the world,” he mentioned.
When requested the place C3.ai belongs, Siebel naturally has no doubts. “C3.ai is a bargain, okay? I mean, it’s a value stock buddy,” he mentioned.
