Google DeepMind CEO Demis Hassabis has warned that parts of the artificial intelligence sector have entered a "bubble-like" phase characterized by unsustainable private market valuations.
Speaking at recent industry events, Hassabis cautioned that seed-stage startups are securing multi-billion-dollar valuations despite having no functional products or underlying technology.
The critique coincides with a cooling period for AI-related cryptocurrencies, which saw collective market caps slip to $18.7 billion.
While larger projects like Bittensor (TAO) and NEAR Protocol (NEAR) showed relative resilience, assets such as Internet Computer (ICP) and Virtual Protocol (VIRTUAL) experienced daily declines of up to 5%.
Hype vs. Fundamental Utility
Hassabis compared the current AI frenzy to the dot-com era, suggesting that a "reckoning" is inevitable for firms relying solely on investor overexuberance.
He argued that while the internet was ultimately transformative, many early companies failed once speculative capital withdrew during the 2000 market correction.
The DeepMind chief noted that Google remains insulated from such volatility because it integrates AI into existing, revenue-generating businesses to improve operational productivity.
Microsoft CEO Satya Nadella echoed similar sentiments, stating that global adoption must widen beyond tech circles to justify current investment levels.
Read next: GameStop Transfers $421 Million In Bitcoin To Coinbase Amid Deep Treasury Losses
Macro Headwinds for AI Tokens
The downturn in AI tokens appears linked to broader macroeconomic factors beyond executive commentary. Sentiment has weakened following indications that the U.S. Federal Reserve is unlikely to lower interest rates during its upcoming January meeting.
Investor caution is also rising ahead of a heavy corporate earnings week, where one-fifth of the S&P 500 will report quarterly results.
These reports are expected to clarify whether the "AI premium" in tech stocks is translating into actual profit growth or merely masking structural inefficiencies.
Read also: Institutional Capital Rotates To Altcoin ETFs As Bitcoin Outflows Hit $104 Million
