Ken Griffin says AI is almost certainly in a bubble, warns of GPU oversupply

Citadel founder Ken Griffin said Tuesday that investors are almost certainly in an AI bubble. Griffin spoke at Citadel's Future of Global Markets Conference in New York on Oct. 20. Griffin did not recommend selling AI stocks or predict a collapse.

Griffin argued that major economic transformations generally involve bubbles and that surviving companies often become market leaders for decades. Griffin cited the internet boom and expressed regret about selling Amazon shares. Griffin said AI agents had reduced the time needed for some advanced Citadel research from weeks to a couple of hours. AI agents are software systems that independently perform tasks involving multiple steps.

The AI infrastructure expansion has supported equity markets over the past year, giving many index funds and retirement accounts exposure to AI investments. A bubble develops when asset prices rise much faster than the underlying businesses can justify.

Griffin likened GPUs, graphics chips used to train and operate AI models, to airline seats. GPUs and airline seats have low marginal operating costs, so serving an additional customer costs little and excess supply can cause prices to collapse. Griffin cited the telecom expansion around 2000, when excess fiber-optic cable capacity drove communication prices lower. Griffin questioned whether chips already five or six years old could continue earning exceptionally high rental rates for another five or six years.

Griffin said corporate buyers are distinguishing tasks that warrant premium models from OpenAI and Anthropic from tasks suited to cheaper open-source alternatives. Open-source models allow users to download and operate models on the users' own computers. Griffin said this purchasing scrutiny creates pressure against the AI labs' spending. Griffin said companies across corporate America have achieved uneven value from AI and are examining lab bills for evidence of productivity gains.

Gartner forecasts nearly $1.5 trillion in worldwide AI spending for 2025, including chips, servers and phones with AI capabilities. Nvidia CEO Jensen Huang said at Davos in January that only a few hundred billion dollars had gone into the infrastructure expansion. Huang described the expansion as the largest in human history and said trillions of dollars of construction remained. Chip suppliers and cloud companies relying on that spending would be affected first if customers resist premium pricing.

On July 30, Situational Awareness sold most of the fund's publicly traded stock portfolio to Citadel at a discount of roughly 10%. Situational Awareness is a hedge fund established by former OpenAI researcher Leopold Aschenbrenner. The portfolio's value reportedly declined about 67% in July. Situational Awareness had borrowed up to four times the fund's capital to purchase AI stocks. The fund's lenders demanded additional collateral daily as share prices declined. Such lender-driven sales can reinforce falling prices and generate further collateral demands.

Griffin wrote in an August client letter that Citadel had subsequently eliminated more than 80% of the portfolio's risk. Citadel therefore bought discounted AI stocks before Griffin's warning about a bubble.

Earlier this year, Griffin warned that energy prices would rise substantially if the Strait of Hormuz remained closed for another six to 12 months. Griffin warned that the resulting energy-price increase would cause a global recession. The Strait of Hormuz is an important route for oil shipments.

Goldman Sachs Research noted in December that Wall Street analysts expect capital-spending growth among the largest AI infrastructure builders to decline. Analysts expect that growth to slow from 75% in the third quarter of 2025 to 25% by the end of 2026. That capital spending funds chips and data centers.