Ken Griffin, founder of the Wall Street giant Citadel, said on Tuesday, Oct. 20, that investors are “almost certainly” in an AI bubble—though he is not telling them to dump their AI stocks.

“What’s left in the wake of these bubbles, if we want to use that word, is often game changing for the world. And the companies that are on the other side of that bubble are the market leaders for decades to come,” Griffin said at Citadel’s Future of Global Markets Conference in New York.

The observation reaches beyond tech investors. The AI buildout has underpinned equity markets over the past year, so many index funds and retirement accounts now hold a slice of it. A bubble occurs when prices climb far faster than the businesses behind them can justify, until reality catches up. Citadel itself is a hedge fund, a private firm that invests money for wealthy clients and institutions.

According to Griffin, the fact that the market resembles a bubble is not a major concern in the bigger picture. “Any radical transformation of our economy is generally intertwined with a bubble,” he said, recalling the internet boom and adding that he wishes he had kept his Amazon stock. Companies that emerge on the other side of a bubble tend to lead markets for decades, he argued, though he stopped short of predicting a collapse.

His own firm serves as a case study. Griffin said AI agents, software that carries out multistep tasks on its own, have cut some high-level Citadel research from weeks to a couple of hours.

GPUs and Airline Seats

Griffin compared GPUs, the graphics chips many companies use to train and run AI models, to airline seats. Both have a very low marginal cost to run, meaning the extra expense of serving one more customer is tiny, so prices can collapse once supply outstrips demand. A chip glut, he warned, could send prices into freefall, much as fiber-optic cable prices did after the telecom overbuild around 2000, when companies laid more cable than demand required and communication prices fell.

He also expressed doubt that chips five or six years old, which still earn rental rates he described as extraordinary, will keep doing so for another five or six years.

Buyers Turn Selective

Demand-side behavior is shifting as well. Griffin said corporate buyers are weighing premium models from OpenAI and Anthropic against cheaper open-source alternatives, meaning models anyone can download and run on their own computers, sorting which jobs justify the premium options. That selectivity strains against the labs’ spending. Corporate America, he added, has been uneven at extracting value from AI, with companies studying their bills from the labs and asking where the productivity is.

The debate is unfolding against enormous expected outlays. Gartner forecasts worldwide AI spending of nearly $1.5 trillion for 2025, counting everything from chips and servers to AI-enabled phones. Nvidia CEO Jensen Huang said at Davos in January that the industry is only “a few hundred billion dollars” into what he called the largest infrastructure buildout in human history, with trillions still to build. If customers balk at premium prices, the chip and cloud companies counting on that spending would feel it first.

A Forced-Selling Episode

Griffin’s bubble call also coincides with a recent episode of AI-linked forced selling. On July 30, Situational Awareness, a hedge fund founded by former OpenAI researcher Leopold Aschenbrenner, sold most of its public stock portfolio to Citadel at roughly a 10% discount after its value reportedly fell about 67% in July.

The fund had borrowed as much as four times its capital to buy AI stocks, a tactic known as leverage, and its lenders asked for more collateral every day as prices fell. Selling because lenders demand it, rather than by choice, is known as forced selling, and it feeds itself because each sale pushes prices down and triggers more demands.

Citadel has since shed more than 80% of the risk in that portfolio, Griffin wrote in an August letter to clients, meaning the man calling the bubble also bought the discounted stocks.

Other Warnings and the Spending Outlook

Griffin warned earlier this year that if the Strait of Hormuz, a key oil shipping lane, stayed closed for another six to 12 months, energy prices would rise materially and push the world into recession.

Wall Street analysts expect growth in capital spending, the money poured into chips and data centers, by the largest AI infrastructure builders to slow from 75% in the third quarter of 2025 to 25% by the end of 2026, Goldman Sachs Research noted in December. Those projections double as markers for the questions Griffin raised: whether spending on the buildout cools on the schedule analysts sketch, whether corporate buyers keep weighing premium models against cheaper alternatives, and whether older chips keep earning the rental rates he doubts they can sustain.

Source: Decrypt — Ken Griffin Says AI Is 'Almost Certainly' in a Bubble—And Compares GPUs to Airline Seats