A prominent technology investor in the UK has labeled companies in the artificial intelligence sector as “confusing,” raising alarms about a potential AI stock market bubble.

James Anderson, known for his early investments in Tesla, Amazon, and China’s Tencent and Alibaba, which yielded significant returns for Bailey Gifford’s flagship fund, now serves at Ringott, an Italian investment firm. He noted that he had not observed any signs of an investment bubble until recently, particularly following large valuations announced by OpenAI, the creator of ChatGPT, and its competitor, Humanity.

“In the last few months, what surprised me was the lack of bubble indicators [in AI],” he told the Financial Times.

OpenAI is reportedly in talks for a stock sale that would value the company at $500 billion (£370 billion), a significant increase from its previous valuations of $300 million in April and $157 billion last October. Meanwhile, Humanity has recently seen its valuation nearly triple, reaching $170 billion last month, up from $60 billion in March.

“These rapid valuation increases should raise some questions. Something like Humanity was generating concerns among those looking to invest in OpenAI,” he remarked.

Anderson also expressed unease about Nvidia’s investment of up to $100 billion in OpenAI. Nvidia, a major player in AI infrastructure and the manufacturer of computer chips essential for training AI models, has seen its market valuation soar to $4.5 trillion. According to the agreement, OpenAI pays Nvidia in cash for services, while Nvidia invests in OpenAI with equity.

There has been ongoing commentary on this transaction that likens it to vendor financing, where companies offer financial support to purchasers of their products.

Anderson described himself as a “huge admirer” of Nvidia but indicated that the OpenAI agreement “has caused more concerns than before.”

Citing similar practices during the Dotcom bubble when telecom equipment manufacturers lent money to clients, he noted:

“There weren’t many telecom suppliers from 1999 to 2000, but there’s a familiar pattern. I don’t feel entirely at ease regarding this situation.”

Anderson is currently the managing partner of Lingott’s Innovation Strategy Fund, which is owned by the Agnelli family, known for their control over Ferrari and Juventus FC.

Nvidia and OpenAI were contacted for comments.

Many investors share concerns that stock market valuations may be on the verge of becoming bubbly due to the excitement surrounding AI.

Wolf von Rotberg, a stock strategist at J Safra Sarasin Sustainable Asset Management, cautioned on Tuesday that US stocks were becoming “increasingly absurd” after Donald Trump’s initiation of a trade war.

“Much of the rebound has been fueled by the highly favorable narrative surrounding AI and the surge in investment. While there’s no clear indication of a bubble, it might mirror the exuberance of previous periods.”

“Current valuations are not far from the peaks of the Dot-Com era in the early 2000s. Likewise, the credit market has traded at historically low-risk spreads over the past 25 years,” Von Rotberg stated.

City Consultant Capital Economics remarked that the market rally needs to deliver more. “With the S&P 500 reaching record highs, it’s no surprise that discussions of a stock market bubble in the US are resurfacing.”

“That said, as enthusiasm for AI continues to escalate, we wouldn’t be shocked if this year’s indices surpass the current forecast of 6,750.”

According to Deutsche Bank Research Institute, searches for “AI Bubble” on Google Trends have declined significantly over the past month.

“One AI bubble has already burst, and that is the notion that there is a bubble,” it concluded.