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Will the AI bubble burst?
If a sharp correction were to occur, tighter financial conditions could drag down world growth.
AI is going to change the world faster than anything we've ever known.
It is everything everywhere all at once.
It's World Business Report from the BBC World Service.
This is Andrew Peach.
Today, warnings from the Bank of England and the IMF.
But what risks are they talking about?
Also on the way why Bollywood is moving to Britain and how the veggie burger could soon be a thing of the past.
We'll start, though, with tech stocks on the rise.
Coming up, markets shake off government gridlock as a wave of good news from AI and semiconductor companies pushes tech stocks to new highs.
What launched in 1993 as a tech startup developing advanced video game graphics is now the most valuable company in the world.
We're talking about NVIDIA.
Asia to catch a tailwind from the latest blockbuster AI chips deal, with AMD soaring as it signs up to build infrastructure for open AI.
Today an intervention from the Bank of England warning the value of AI tech companies is stretched, with the rising risk of a sharp correction.
The bank says the market is comparable to the peak of the dot-com bubble at the turn of the century, and the concentration of stock markets on a handful of big tech firms is the risk.
The head of the International Monetary Fund, Kristalina Georgieva, agrees.
History tells us this sentiment can turn on the dime.
If a sharp correction were to occur, tighter financial conditions could drag down world growth, expose vulnerabilities and make life especially tough for developing countries.
Well, I've been talking to Brent Hoberman, who's an entrepreneur and former CEO of LastMinute.com.
What it's obviously really talking about is the infrastructure.
The bubble really isn't, I don't think it's saying it's all AI companies.
It's so much concentrated around NVIDIA OpenAI, those meta Google, those companies doing the huge CapEx expense and saying how long is it going to take for them to be able to monetize that?
While it's not many companies, it is obviously a very high concentration and density.
I think it's like 30% of the S&P value by value is now these AI-related companies.
So yes, I think it presents a risk.
But what it does mean is that massive innovation is triggered.
That's a real positive.
It may mean it takes longer to get there.
And this is what happened in the 2000 bubble, right?
So the bubble burst.
Everyone said, oh, my God, the internet's a terrible thing.
It's not going to work.
And then the 10% of companies that made it, made it massively big.
Many people say bubbles are sort of healthy.
They're healthy because they spare innovation.
And if you have a correction, it can take some steam out of it and you can build back.
More from Brent Hoberman coming up.
Live now to Alison von Diglen, journalist covering tech in Silicon Valley.
Joining us from there on World Business Report.
Alison, what do you make of this intervention today, this warning that the bubble might burst at any moment?
I think it is a valid warning.
I think there is a bubble burst not necessarily about to burst, but it feels like a bubble in Silicon Valley.
And the smallest leak in that bubble, the smallest setback or disappointment could deflate expectations and the market.
And I think the analogy with the internet bubble is a very good one.
It promised to change everything in 1995, and it did.
But not all the dreams came true.
Not all the companies prospered.
And it, as Brad said, burst in March 2000.
And I think Jeff Bezos is a good one to watch today.
He was talking about.
There's a crucial difference between this AI bubble and the dot-com bubble that it's an industrial bubble.
And he's saying that AI will produce lasting benefits for society even when individual companies fail.
But yes, as Brad pointed out, the stock market is very tech heavy right now and it's vulnerable.
The market is vulnerable.
The American economy is vulnerable because it's being undermined by some of the actions that the Trump administration is taking.
The huge value in these top tech firms is really based on belief about the future then, rather than their effectiveness as business models now.
It's this belief that AI is everything and therefore the value is almost, you know, can't even be worked out.
Yes, there's a lot of optimism.
I mean, Silicon Valley is full of optimism.
That is why it's the engine of innovation and growth.
You have to have that optimism.
It's kind of a key ingredient in the DNA here.
But yes, there's so much money going into it.
There's a lot of expectation that there'll be a return on investment.
That has not been proven yet.
But what I'm hearing is productivity is starting to be measured and increasing.
There there have been um, what i'm hearing is inside companies they're starting to look at and actually it's a very measurable thing, you know for, for someone who writes code, how much code, how many lines of code did they write last year and how many are they doing this year?
And they can.
They're starting to record that and it'll be interesting to see.
Um, there were some uh reports.
There was some research done by mit last year to say, at the entry level for coders there was a significant increase.
But the latest research from mit is saying that is the roi, the return on investment is not yet proven.
So um, we are, we're kind of in a wait and see situation, but i think, like i said, the hype is necessary and um, But I think we're in a dangerous position in the United States.
The economy is being undermined by a weak dollar, by the rush of investors to gold.
Gold hitting $4,000 an ounce is quite significant.
And people are looking at that, and that is a barometer of investor sentiment and a move away from this reputation of the strong dollar.
So that's all part of this trend.
Stay with me, Alison, live to Rajiv Chowdhury, founder and CEO at Algarisk AI.
Rajiv, thank you for being with us on World Business Report.
You'd think, if everyone was saying all of the companies are too stretched and there's a risk of a correction, that someone like yourself would be worried.
I think I agree to a certain extent what Andrew Bailey has said, that there is concern and there is issue.
But at the same time, there's a lot of excitement in terms of how AI is used in the world right now.
So there are parallels in terms of how it's similar to the dot-com boom in 1990s, a time when people believed every internet company would change the world overnight.
But that is something that didn't happen, right?
So there are those companies which did really well and there are other companies which didn't do that well.
But one thing was definite that... there was definite progress in terms of technology that happened.
So the real question that I see is not so much the hype that is there, because that is definitely there, but that is more on the equity side that some of the valuations are really inflated at this point in time.
But on the other side, if we look at the real world economy, because I come from the banking sector.
So if we go into the banking sector, the bankers are really, really smart guys, you know, especially over here in the UK, wherein they are very aware of the risks that are there and what are the challenges in terms of adopting this new technology.
And they understand the real problems.
And just last week Andrew Bailey also said the same thing that you know.
We have to be pragmatic and open minded about this new technology.
So there are risks that comes along with it because it's new.
So we have to understand what those new risks look like.
But at the same time, there are a lot of opportunities that comes along with it.
So if we just ignore the upside of this new technology, then I think that will also be wrong.
And that is something that we are doing as a part of Algorisk AI, wherein we are focusing on using AI to develop solutions in a transparent and efficient manner.
Because some of the challenges that you see with AI is like hallucination.
OK.
Let me ask you this, Rajiv.
What might prompt the bubble to burst?
Because that's what the warning is about is that there's some kind of sudden market movement that devalues these top companies, which are so big, that have a real impact not only on the US economy but the global economy.
What's the thing that could start that whole chain of events?
Well, it's difficult to pinpoint one because, in case, if there is going to be one, there will be a series of things.
So something in terms of you know if there is a massive data leakage somewhere, because that is something which is very critical to all the companies, enterprises and personal consumers as well.
So data is always the focus point in terms of how these technologies work.
And the workings behind the LLM models is very complex.
It's not very transparent.
So if there is something which is not really transparent and explainable going forward, then that is something that might put people off from adopting these technologies going forward.
But for me, the way I see it, is that there is a lot of talk in terms of what it will be developed in future.
But if we even disregard that, if we just stick to what we have as of now, I think we have got something really amazing in terms of what the LLM can do and how we can leverage it to get so much of productivity out of this technology and adopt it in our daily processes.
For example, we have got people working on documentation for weeks and weeks, whereas we can just use AI with the guardrails built in in order to ensure that the output that it is giving us is accurate.
Ace can be fact-checked, and it is explainable.
Because wherever there is an element of which you can't explain, then I think that is where the risk lies.
Yes, I understand.
So I always look at the risk, right.
Rajiv, thank you very much indeed for that.
Back to Alison Van Diggelen now.
The fact that we're talking about such a small number of companies with this huge value.
Is that good for creativity in an area that still needs it, or is it actually rather restrictive?
Well, I think yes sure, there's a lot of value in the top chip companies like Nvidia AMD Intel ARM Amazon Microsoft, et cetera.
But I think it's a mistake to focus too much on these big valuations.
AI is permeating every part of our society today.
Already, you know, from small companies, city councils all the way through to these big tech giants.
And I think it's not going to go away.
I think it's going to be impactful.
And we haven't even talked about professional services.
The big four in AI Deloitte PwC Ericsson Young, KPMG they're investing tremendously billions into AI to transform their auditing and tax services.
And I think this, sure, there will be companies that make the wrong bets.
But I think America is betting big on AI.
And I think it's probably going to pay off for many of these companies.
Alison, thank you very much indeed for being with us from Silicon Valley.
Now on to Britain's relationship with India, which is at an all-time high, at least according to its Prime Minister, Keir Starmer, who's on a two-day trip there.
He's announced that three Bollywood blockbusters are going to be made in the UK, in a move he says will create thousands of jobs and deliver a multi-billion pound boost to the UK economy.
He's in Mumbai with more than 100 business executives and university leaders, including Brent Hoberman from lastminutecom, their former CEO, who I've been talking to for the programme today.
I think both sides have a real energy about getting this trade agreement through the next step and then building on it and making it really beneficial for both countries.
Help me with what the link is between the state of the British economy and the state of the Indian economy.
I mean, there are two countries with historic links.
What else is uniting them?
I think the world's largest democracy with the mother of democracy helps.
Also the fact that the UK has so much innovation and you can get all of this innovation and deep sort of technical expertise and creative expertise and educational expertise and you can get that matching India's scale, I think is also important.
OK.
I mean, the sort of oldest democracy and largest democracy sounds like a spin on a press release.
You know, it sounds like what you'd write down about it.
But what's the real kind of economic imperative going on here?
In the end, what comes down to is good old fashioned, you know, self-interest in economics.
It works quite well.
And there is self-interest on both sides to build strategic links.
So there are synergies in this economic trade deal that they've done.
They fought hard for it, took three years, I think, and it'll be four years before it's implemented.
We have things like most favoured nation clauses going forward.
We have massively reduced tariffs.
It's not my job to deliver a deal like that.
It is my job just to observe that it's happened.
That clearly means there was energy on both sides, because it's a very positive deal.
And many countries have not been able to get such a good deal with India.
Yes, I was interested in your role among 100 or so business leaders who were there with the UK Prime Minister in India.
It's obviously interesting to be part of it and to watch and all of that, but are you guys looking for business opportunities yourselves?
Are you doing deals of your own?
How's that working?
Yeah, absolutely.
No look, I think lots of you know almost everyone is trying to find the opportunity for their businesses.
You know, I just spoke to somebody who they went the prime minister went to some film production companies who've now agreed to make three films in the UK.
So these sort of things are happening.
I was just with one of the largest fintechs in the UK and he has had some positive conversations about fintech regulatory harmonization potentially in the future.
This is potential.
But so The ability is to take things further.
A lot of people in the delegation have lots of employees in India as well.
So they're trying to work out what's the next step for that.
Personally, I'm obviously a tech investor.
I obviously also run Founders Factory, which works with large corporates and helps them innovate.
I think it could be a good time.
We've managed to get as far as Australia and to work with Rio Tinto in Australia.
So I think it's time for us now to explore doing partnerships like that in India, where they have 200 incubators already and 100 unicorn founders already, unicorn companies already.
So I think we have opportunities there.
And actually we did events in India back in 2012, but we stopped because there was too much trade friction.
And now we're going back.
And today we announced that in February next year, Founders Forum will be running what will be its third entrepreneurial event in India and I think in Mumbai again actually and I think that'll be a good follow-up for many of the people who are here to take their conversations further.
And does it?
Being part of a delegation like this, with the politicians present?
Does that just bring everyone together?
It's fundamentally, that's what it does from a business point of view.
It creates an opportunity for you to talk to people in fintech, to talk to people in other areas of investment that you might be interested in.
The government is brilliant at convening power.
It's honestly especially brilliant when the prime minister himself comes.
And that then you get a trigger effect, which means the sort of ripple effect, which means that other top not just politicians and heads of provinces and all that turn up, but also some of the biggest businessmen in India turn up.
I just had a chat, just 10 minutes before this, with Sunil Mittal, the founder of Bharti Airtel, for example, a huge Indian entrepreneur.
If you're entrepreneurial and you've got gumption, you can just go up and talk to them and you can try and do your deal and you can get your follow-up meeting.
It happens and it's powerful.
Taking us inside the room on one of these international trade missions Brent Hoberman, the co-founder and chairman of the Founders Forum Group and First Minute Capital.
This is World Business Report with Andrew Peach here on the BBC World Service.
And gold hit the headlines again today.
A golden milestone.
Gold smashes through $4,000 for the first time as the U.S. shutdown fuels that rally.
All right.
So go figure.
$4,000 gold.
All right.
We are a business show and gold is $4,000 and I have no way of explaining it.
Now, they may have no way of explaining it, but Susan Schmidt definitely does.
She's Portfolio Manager at Exchange Capital.
She's live from Chicago with us.
It doesn't seem so long ago that I was on World Business Report talking about the record being 3000.
We're now hitting $4,000.
Why?
Here we are at $4,000 and gold still going up, $4,025, hitting new highs today again.
And so we're seeing that because I think investors are looking for ways to diversify their assets.
Equities have done particularly well this year.
You know what's done even better?
Gold.
And so investors are looking at a very strong equity market, but also recognizing that there's still some political uncertainty, economic uncertainty, along with that with some of the major economies.
When that happens, investors look towards other asset classes.
Gold is a store of value.
It's a respected asset class.
And investors are turning towards that, diversifying away.
So we're seeing that not only at retail investors, institutional investors, but also central banks, diversifying their what we would say US treasuries, those global holdings from countries are now also being converted into gold as a store of value.
Right.
So I've learned a lot about the flight to gold when there's economic and political uncertainty.
Is there any ceiling on its value or could it just go up and up and up?
Gold is one of those things that the value doesn't necessarily have a ceiling.
The demand is whatever sentiment is at the time.
It does have consistent value over time.
It's not something that's disappeared.
There's always been a value attributed to gold.
And interestingly, gold supply does grow every year because we do see more gold being mined.
So gold itself.
Better reflection of the movement of gold, not necessarily carried through to the mining companies of gold.
That reflection of gold is in the gold ETFs or the solid gold prices themselves.
But it doesn't seem to have a ceiling right now.
That is something that just keeps going up.
And certainly over time, over decades, it's been an upward path.
And it's really interesting as a marker of sentiment of what's going on, all of that.
Does it actually make any difference to consumers, to people who are listening to us now?
Don't think it makes a difference in the day-to-day, other than certainly they're going to feel it when you go out and want to buy a piece of gold jewelry.
The holidays are coming up, a special occasion gift.
You will see that price of the ounce of gold, as that increases, that price in the piece of jewelry increases as well.
For individuals it doesn't make a big difference in the day-to-day but it is good to know about as a diversification of your asset class.
That's where a lot of investors are going right now, just to add it in, to balance out that big run that we've seen in equities.
Finally, quick word about the Fed.
We've got more insight now into the Fed's intention to lower rates further as the year goes on.
We've seen those minutes from the last Fed meeting come out today.
We did see that the majority of members of the Fed wanted to, and expected to, lower interest rates further this year.
They're concerned that the labor market in the US needs a little bit of propping up and that interest rates may be too high.
Importantly though, because we have a government shutdown in the US, we're missing a lot of the economic data that would help them make that decision to take further interest rate cuts as we go into the rest of the year.
And so the Fed will have to be looking at different data going into their next meeting to figure out what the labour market is showing, and that will complicate their ability to make a decision on what to do with interest rates.
OK, Susan, thank you very much.
Now, ads like this may soon be a thing of the past in Europe.
All taste, no worries.
Beyond Meat.
Juicy, meaty burgers.
Made from plants.
Manufacturers of plant-based foods might soon need new names for veggie sausages and burgers, after the European Parliament voted in favour of banning meaty words for vegan and vegetarian foods.
It might not quite be the end of veggie schnitzels just yet, though.
There will now be a negotiation about it between MEPs, the Commission and national governments.
Pascal Bieri is the co-founder of the food company Planted, which makes vegan meat alternatives.
He's in Paris.
I think this is super short-sighted.
I've never heard or seen any consumer that was confused by a celery schnitzel, that was confused by a planted sausage or anything thereof.
I think it holds consumers very much not accountable to their actions. kills any innovation.
Plus all the farmers that we talk to and we source from plenty of European farmers.
They like innovation.
They like innovation in this space.
It seems like one industry is very much afraid of a future that might be a little bit better for everybody and tries to yeah, force this now.
Thomas Weitz is a green MEP.
Thomas is in Vienna.
For farmers, and I'm a farmer myself, look, we produce what consumers like to eat.
And we can produce this and that.
And if consumers eat more vegetables and more grains, we produce more vegetables and more grains.
So it's not about farmers.
And this is not helping farmers at all.
It's not creating a single cent of additional income for farmers.
It's more an ideological battle that we see here, where vegan is being seen as something that is vogue, that is kind of progressive and that's something we don't want anymore.
It's kind of greenish.
Uh, it's it's.
It seems to be good for environment, so that's not something we want.
It's kind of a cultural war that has been waged here, especially by the far right, but unfortunately european people's party is joining in which, you can see, with this amendment.
Uh, It's so interesting, because my first instinctive reaction is that consumers know what they're buying.
So what's the issue here?
And then I guess my second thought is well, so why do plant-based products in 2025 need to be marketed as meat substitutes?
Why does it have to be called a sausage or a burger or a schnitzel when it's clearly not that?
Well, first of all, I mean, we're having a lot of different languages in the European Union.
And in my home language, German, the word Schnitzel is used for a lot of things.
If I chop wood, so wood chops in German are called Hackschnitzel.
Which has nothing to do with meat.
These words are used for many products that are not edible at all or other edible stuff.
It's not about comparing with meat, but it's about the question whether really consumers need the European Parliament to kind of teach them how to read meat.
What is written on a package?
And consumers, and I got a lot of replies from consumers that are telling me exactly this, that are telling me Thomas look, really can you take care about important things?
We exactly know what is a vegetarian or vegan product.
And we're absolutely aware in which sausage we find meat and in which sausage we do not find meat.
So I really don't think we need to educate consumers there.
People are smart enough to detect what is in a product and to choose what they want to eat.
I'm sure that's right.
I suppose it's a sort of creative challenge, isn't it to the manufacturers of plant-based products to come up with their own names, their own shapes, you know, to distinguish the things, to make them more original?
Yes, and there's a lot of startups and there's a lot of successful industries producing plant-based food in the European Union.
We're actually a global player in this.
And I see no reasoning why we should limit or... or damage some of their trademarks.
And overall, if we look at meat consumption and dairy consumption, to whatever doctor or scientist you talk to, they will all tell you it would be very healthy for our societies to reduce meat consumption.
I am the coordinator for the Greens in the Agricultural Committee and I hear my colleagues mourning about reductions in meat consumptions and we need to put advertisement and public money to advertise meat, because that cannot be that there's a reduction in meat consumption.
I welcome a reduction in meat consumption.
I think it's a choice that we should all look into.
So it's more, I would say, some lobby attempts of meat processing industry that have been finding their ways into a legal proposal here than really talking about how to help farmers or how to educate consumers.
And that's it from this edition of World Business Report.
From me, Andrew Peach, and the team, thanks for listening.
