Analysts are becoming increasingly wary of the mind-boggling sums being poured into the hot field of artificial intelligence (AI).
AI bubble fears: Why Bitcoin is falling
“We’re looking at a commitment of about $1.4 trillion over the next eight years,” OpenAI CEO Sam Altman said last week. This figure is about $200 billion larger than the gross domestic product (GDP) of the Netherlands, a wealthy European nation of 18 million people that was once a world power.
This comparison encapsulates the level of hype surrounding AI, with many believing that the industry is currently completely engulfed in an ever-expanding bubble that could burst at any moment. The ensuing unrest appeared to dampen sentiment towards tech stocks and Bitcoin, with the Nasdaq down 0.28% and the cryptocurrency down 2.36% on Wednesday afternoon.
(OpenAI CEO Sam Altman said the company is committed to investing $1.4 trillion in computing resources over the next eight years, which is almost $200 billion more than the Dutch GDP in 2024 / Source: World Bank)
OpenAI rival Anthropic just announced plans to spend $50 billion building AI data centers in New York and Texas in a bid to compete. This follows a wave of other multibillion-dollar AI investments by tech giants Meta, Alphabet, and Microsoft.
read more: Stock prices fall due to fear of AI bubble, Bitcoin plummets
But the little secret behind these huge investments is in the details. The Wall Street Journal reported that it had obtained financial documents showing both privately held companies were bleeding money. Anthropic’s bleeding has been less pronounced, and the company is on track to break even by 2028. However, OpenAI would incur a loss of $74 billion in the same year. The risk-on sentiment stemming from such predictions may explain the driving force behind today’s declines in both tech stocks and Bitcoin.
“In a world where AI has the potential to make important scientific advances, it will sacrifice a huge amount of computing power, but we want to be ready for that moment,” Altman explained. “We intend to be a very successful company, but if we fail, it’s our fault.”
Overview of market indicators
At the time of reporting, Bitcoin was trading at $100,950.39, down 2.36% in 24 hours and down 3.19% on a weekly basis, according to data from Coinmarketcap. The digital asset’s price has fluctuated between $100,836.61 and $105,297.23 since Tuesday.
(BTC Price/Trading View)
The 24-hour trading volume was $62.77 billion, down 12.73%. The market capitalization decreased to $2.01 trillion, and Bitcoin’s dominance reached 60%, down 0.28% from yesterday.
(BTC Price/Trading View)
According to Coinglass, the total value of open Bitcoin futures contracts decreased by 3.58% in 24 hours to $66.14 billion. However, liquidations increased to a total of $186.47 million, with the majority being long investors who were caught off guard by Bitcoin’s decline, losing $149.53 million in margin. Short sellers were largely spared, but the most bearish group lost $36.94 million.
Frequently asked questions ⚡
- Why is Bitcoin falling again?
Investor fears about the possibility of an AI bubble and huge spending in the sector appear to be weighing down both tech stocks and Bitcoin. - What prompted the sale?
Reports of predicted huge losses for OpenAI and Anthropic have fueled fears that the AI boom may become unsustainable. - How much money is flowing into AI?
OpenAI’s Sam Altman said the company has received $1.4 trillion in contracts over the next eight years. - How is Bitcoin performing today?
BTC fell 2.36% to around $101,000 as traders reduced risk amid AI-induced volatility and weak market sentiment.
