Bill Gates Issues Warning on AI Investment Hype, Urges Caution

Bill Gates has warned AI investors that not everyone will be a winner in what he calls a “hypercompetitive” market.

The Microsoft (MSFT) cofounder cautioned in December that “a reasonable percentage” of today’s pricey AI stocks can’t justify their valuations. “Not all of these valuations will end up going up. Some of them will go down,” Gates told CNBC. 

Gates’ concerns came as the so-called hyperscalers—Microsoft, Alphabet (GOOG), Amazon (AMZN), Meta Platforms (META), and Oracle (ORCL)—spent $400 billion on infrastructure in 2025 and are set to spend a third more in 2026.

Some investors worry the sheer size of those figures has encouraged speculation on Wall Street, causing some AI stocks to trade at eye-watering valuations.

Software firm Palantir (PLTR) has a price-to-earnings (P/E) ratio of almost 400, among the highest in the S&P 500. Shares of chip designers Broadcom (AVGO) and Advanced Micro Devices (AMD) have soared over the past year on hopes they can take market share from AI chip leader Nvidia (NVDA). Broadcom’s gains have nudged its P/E ratio to about 70 and AMD’s is about 125, more than four times that of the S&P 500 as a whole.

Then there’s the cohort of unprofitable startups commanding lofty valuations in private markets. OpenAI, the company behind ChatGPT, isn’t expected to turn a profit before the end of the decade. Yet the startup was seeking further investments in the last couple of months that would put the value of the company at least $750 million, which would make it larger than all but 13 of American publicly traded companies.

The AI buildout has turbocharged the sales and profits of some companies, leaving their valuations relatively steady despite big stock gains. AI demand has accelerated growth in the cloud computing businesses of Alphabet (GOOGL), Microsoft, and Amazon.com (AMZN), all three of which have P/E ratios hovering around 32 to 34. Booming demand for Nvidia’s chips made it a $4.5 trillion company, but shares trade at a relatively modest 45 times earnings. 

Bubble jitters have hit tech stocks several times since ChatGPT sparked the AI craze on Wall Street. In November, the Magnificent Seven nearly entered a technical correction. Less established competitors like Oracle (ORCL) and CoreWeave (CRWV) performed even worse.

As with past pullbacks, investors shook off valuation concerns and bought the dip, lifting tech stocks out of their November slump, leading to new highs in early 2026.