Ex-OpenAI Bret Taylor Says AI Is a Bubble—Companies Shouldn’t Build Their Own Models

Key Takeaways

• Bret Taylor, former chairman of OpenAI, has expressed concerns about a potential AI bubble.
• He drew parallels to the dot-com bubble of the late 1990s.
• Taylor also advised companies to avoid building their own models.
• In the meantime, OpenAI’s valuation continues to increase.

Bret Taylor, former chairman of OpenAI, has cautioned that the current hype surrounding artificial intelligence (AI) may resemble the excesses of the dot-com bubble in the late 1990s.

In a podcast interview , Taylor compared the current AI boom to the dot-com era, suggesting that while there may be similarities, the outcomes could differ.

“We Are in a Bubble”

“I think we are in a bubble. But I think bubbles have different shapes, and there’s a Mark Twain quote that history doesn’t repeat itself, but it rhymes,” Taylor said during the interview.

“I think the AI bubble will rhyme with the dot-com bubble and I believe with the benefit of hindsight, most of the excess of the dot-com bubble might have been justified,” he added.

Companies Shouldn’t Build Their Own Models

Taylor believes that companies building their own models is not a wise use of capital unless they are an AGI research lab. He views software development as an ongoing process that requires continuous attention, comparing it to a lawn that needs regular care.

“Software isn’t something you can create once and expect to work forever. In contrast, pre-training a model involves a significant, one-time cost, but once it’s done, the model can be used repeatedly for tasks like generating content,” he said.

Ex-OpenAI chairman argued that using pre-trained models offers many benefits, such as quick implementation and access to a wide range of features, making it more efficient than building from scratch.

Instead of focusing on creating their own models, Taylor suggests that companies should concentrate on developing applications that address specific customer needs, as many affordable, high-quality pre-trained models are already available.

OpenAI’s Increasing Valuation

Bubble or not, OpenAI‘s valuation increases day by day. OpenAI has cemented its place among the world’s highest-valued private companies following its latest funding round, raising $6.6 billion and bringing its valuation to an impressive $157 billion. This milestone aims to “accelerate progress toward its mission” amid growing competition in the AI sector. While OpenAI did not disclose its investors, reports from the Wall Street Journal  suggest that the round was led by venture capital firm Thrive Capital, with participation from backers like Microsoft and new investors such as SoftBank and Nvidia.

With its new valuation , OpenAI surpasses 87% of companies in the S&P 500, joining an elite group of private firms like SpaceX, currently valued at $201 billion, and TikTok. Last year, according to Forge Global’s secondary-market data, OpenAI was valued at $29 billion, rising to $110 billion before this latest round.

Financial estimates from The New York Times  show that OpenAI expects revenue to skyrocket to $11.6 billion by 2025, up from $3.7 billion in 2024. However, the company is also expecting a $5 billion loss this year, driven by the high costs of operating its services, salaries, and other expenses. This loss doesn’t account for equity compensation to employees.

In a recent move, OpenAI restricted access  to its financial documents, sharing them only with investors willing to commit a minimum of $250 million—a possible strategy to screen serious backers.