Former deputy prime minister Sir Nick Clegg warned that the current wave of valuations across the artificial intelligence sector was “a slam dunk”, arguing that despite the billions being poured into machine learning, many AI companies have not yet demonstrated a viable path to profitability.
At the Times Tech Summit, Clegg said that even the world’s leading AI firms – including so-called “hyperscalers” that develop large-scale models – are struggling to demonstrate how their capital expenditures translate into sustainable returns.
“I think there will certainly be a correction in valuations,” he said. “These valuations really seem to be the bomb. I don’t see a business model yet, even among the leading AI hyperscalers, that can recoup this capex. Some of the AI labs that don’t have a particularly good business model will be very exposed to a market correction.”
Clegg’s comments add to growing concerns among economists and regulators that the AI boom could inflate a bubble similar to the dot-com era. The International Monetary Fund’s chief economist recently drew parallels to the early 2000s internet crash that drained $5 trillion from markets, while the Bank of England warned of a possible “sudden correction” in AI-related valuations.
Investors have poured tens of billions into base model developers and AI infrastructure providers, betting on long-term dominance in generative and enterprise applications. But analysts warn that high computing costs, slow commercial deployment and unclear monetization models are creating tensions between hype and profitability.
Clegg, who stepped down as president of global affairs this year after six years at Meta, also used his appearance to criticize Britain’s heavy reliance on American technology infrastructure.
“I think it’s pretty difficult to claim anything other than that we are a vassal state of American technology,” he said. “We are completely dependent on every level of technology from a country where geostrategic interests are no longer as aligned as they have been for the last 30 years.”
He warned that the UK was in a “dangerous state” due to a lack of domestic AI infrastructure and capabilities, particularly given the growing political divisions between the United States and Europe.
Clegg’s intervention reflects a broader unease in Silicon Valley and global markets as AI development enters its first phase of testing since the 2022-23 hype cycle. As some companies – including OpenAI, Anthropic and Google DeepMind – continue to secure massive funding rounds, investors are beginning to demand clearer paths to revenue growth and operational sustainability.
Analysts expect 2026 to mark a turning point for the sector as a likely market correction separates economically resilient players from speculative bets. For now, Clegg’s warning serves as a reminder that even with rapid innovation, the AI gold rush may be running ahead of economic reality.
