Wherever Tom Siebel, CEO of C3.ai, goes, he asks the same question about the future of AI.
“Everyone asks me about it: ‘Is there a bubble here?’ There is definitely a bubble. It’s huge,” he says Fortune in an exclusive interview at C3.ai’s New York office in a Midtown WeWork.
Over the past two years, analysts have wondered whether AI companies, both public and private, could live up to their high valuations. Tom Siebel, who built his career in Silicon Valley as a sales executive at Oracle before leaving to start his own company that he eventually sold back to his former employer for $5.8 billion, the current state of AI reminded him of the dotcom bubble. Even then, a great and wonderful technology – the Internet – could not save a large number of companies from collapse.
“So we have something similar going on with generative AI that we’ve seen with previous technologies,” Siebel said. “The market is much, much overvalued.”
Tech analysts that Fortune spoke broadly agreed with Siebel’s point that industry valuations were too high. “For now, almost every well-known AI company is enjoying a fair amount of investor hype,” said Sandeep Rao, senior researcher at Leverage Shares, an ETP provider.
C3.ai specializes in enterprise AI applications that help companies with various business functions, such as optimizing their supply chain, predictive maintenance and tracking their sales process. It also has a flurry of lucrative government contracts with the US Department of Defense and the US Air Force, among others. Its largest private sector customers include oil and gas giant Shell and energy company Baker Hughes (whose contract is up for renewal soon).
Earlier this week, C3.ai added another blue chip partner to its ranks when it announced a partnership with Microsoft. FortuneSiebel’s interview with Siebel took place before the partnership was publicly revealed. (Alan Murray, the former CEO of Fortune Media, is on the board of C3.ai).
Siebel focused mainly on OpenAI, the startup that has close ties to Microsoft and is perhaps most connected to the AI revolution. OpenAI currently has a valuation of $157 billion after a funding round in October in which it raised $6 billion. Siebel was not impressed with that rating.
“No one would be surprised if that company disappeared next Monday,” he said.
When Fortune Although he ventured that industry observers would be surprised, Siebel responded that it had “disappeared” over Thanksgiving, a reference to the brief ouster of OpenAI CEO Sam Altman in 2023.
“If it went away, it wouldn’t make a difference in the world,” Siebel said of OpenAI. “Nothing would change. I mean, it wouldn’t change anyone’s life. No company would change. Microsoft would find something else to power Copilot. There are ten other products available that would do just as well.”
The OpenAI brand name has cachet because it was first to market, but that alone won’t guarantee its market position forever, says Paul Marino, chief revenue officer at Themes ETF, an exchange-traded fund based in Greenwich, Conn. Just because you’re very well known doesn’t mean you can’t be copied, replicated and maybe even surpassed,” Marino said.
According to Rao, there are differences between major language models, but they are difficult to understand. “LLMs are highly proprietary and establishing definitive awards is not easy,” he said.
Their success, he added, is often due as much to their business relationships as to their underlying technology. “The benefit of an LLM is not necessarily determined by quality, but may instead be determined by low cost and ease of use with existing technology,” Rao said.
In this regard, OpenAI certainly lives up to expectations, as it has built close ties with Microsoft.
OpenAI did not respond to a request for comment on Siebel’s comments.
Siebel also sees overvaluations in early-stage AI startups.
“There’s a long list of AI startups from Illinois, Wisconsin, Stanford, being funded today on Sand Hill Road, where there are very few ideas from people who are very inexperienced, who are going to build generative AI applications for dental practices, vets, or divorce lawyers and these ideas are funded at multi-billion dollar valuations,” Siebel said. They are “just five people who know nothing [with] four pages of a business plan. This is crazy.”
In recent years, a wave of AI startups have emerged with very specific use cases, some of which have indeed sold or raised money at high valuations. Their track records were mixed. In August 2023, Casetext, which specializes in AI for legal work, was sold to Thomson Reuters for $650 million. JasperAI, a startup focused on AI for marketing departments, raised $125 million at a $1.5 billion valuation in a Series A in June 2023, only to downgrade its internal valuation three months later, according to The information.
Exempt from Siebel’s criticism are the big tech giants developing their own line of AI products. Microsoft and Amazon, he said, are “great companies” that are not overvalued. Neither do chip makers Nvidia and TSMC. “If TSMC were to go bankrupt, it would be the end of the world,” he said.
When asked where C3.ai belongs, Siebel obviously has no doubts. “C3.ai is a steal, okay? I mean, it’s a value stock buddy,” he said.
