Risk Management: What If the AI Bubble Bursts?

Over the past few years, there’s been an insatiable investor demand for any stock related to AI.  Recently, however, some respected analysts are starting to warn that the road ahead is likely to be choppier, with investors insisting on clear evidence of earnings gains associated with AI in order to sustain the sector’s lofty valuations. That changing environment means that the AI bubble may burst, which could result in many current AI vendors going the way of Pets.com and the other casualties of the dotcom era.

This Computerworld article has some suggestions for CIOs about how to insulate their own AI programs from the fallout of an AI bubble burst.  Here’s an excerpt addressing the pros and cons of two possible alternatives:

With all this in mind, what can CIOs do to increase the chance that they will emerge from an AI bubble burst in a strong position?  Info-Tech’s Jackson said his first suggestion is to embrace the diversified hyperscalers. “By working with the large players, you are going to be able to replace the models should OpenAI go out of business,” he said.

“Option Two is to make sure you are creating your own products around the model, so that you will be more resilient to the LLM part of it should it be taken away,” Jackson said. Many in the industry have suggested open source as the magic fix for a meltdown. CapitalOne, for example, has designed its genAI strategy around homegrown apps sitting atop open-source models.

“By building on top of an open-source model, you can own your future,” said Carreon from Almacenes Distribuidores de la Frontera. “You can deploy it in your infrastructure and have complete control of your data.”

Info-Tech’s Jackson said he has mixed feelings about relying too heavily on open source. On the plus side, he said, “you can own that on your own premises.” But open source “is not just a free pass to anything and everything,” and it might “not allow for derivative works,” he said — meaning that the enterprise “might be on the hook for royalties to Meta. That’s the sort of trap that you would have to be wary of in the open-source world.”