“AI Company Valuations: Overinflated and Set for a Market Reset”

Former Deputy Prime Minister Sir Nick Clegg has cautioned that the ongoing wave of assessments throughout the artificial intelligence sector is “absurd,” contending that numerous AI enterprises have yet to reveal feasible routes to profitability despite the billions being invested in machine learning.

Speaking at The Times Tech Summit, Clegg stated that even the preeminent AI companies — including the so-called “hyperscalers” creating extensive models — are finding it challenging to illustrate how their capital investments will yield sustainable returns.

“I believe there’s undoubtedly a correction looming in valuations,” he remarked. “These evaluations indeed appear quite absurd. I have yet to observe any business model, even from the top AI hyperscalers, that can recover that capital investment. Some of the AI labs lacking a solid business model will be significantly vulnerable in a market adjustment.”

Clegg’s remarks contribute to escalating worries from economists and regulators that the AI boom might be inflating a bubble akin to the dotcom period. The chief economist of the International Monetary Fund recently mentioned similarities to the early 2000s internet collapse, which eradicated $5 trillion from markets, while the Bank of England has warned against a possible “sudden adjustment” in AI-related valuations.

Investors have funneled tens of billions into foundational model creators and AI infrastructure suppliers, wagering on long-term supremacy in generative and enterprise applications. Yet analysts caution that high computing expenses, sluggish commercial rollout, and ambiguous monetization strategies are generating friction between hype and profitability.

Clegg, who resigned this year as Meta’s president for global affairs after six years with the organization, also utilized his appearance to criticize Britain’s significant reliance on American technological infrastructure.

“I find it quite challenging to assert anything other than that we are a client state of American technology,” he stated. “We are entirely reliant on every tier of the stack for technology from a nation whose geopolitical interests are no longer aligned in the same manner as they have been for the past 30 years.”

He cautioned that the UK’s absence of domestic AI infrastructure and homegrown capabilities places it in a “dangerous position,” especially amid expanding political divisions between the United States and Europe.

Clegg’s intervention echoes a broader discomfort in Silicon Valley and global markets as AI development enters its initial phase of scrutiny since the 2022–23 hype wave. While some firms — including OpenAI, Anthropic, and Google DeepMind — continue to secure substantial funding rounds, investors are starting to request clearer pathways to revenue growth and operational sustainability.

Analysts anticipate that 2026 will signify a pivotal moment for the sector, with a probable market correction distinguishing commercially steadfast players from speculative investments. For the time being, Clegg’s alert serves as a reminder that even amidst swift innovation, the AI gold rush may be advancing ahead of economic reality.