Zoho Founder Raises Alarm on AI Investment Boom
Sridhar Vembu, the founder and Chief Scientist of Zoho, has characterized Artificial Intelligence (AI) as the "biggest investment bubble yet." Speaking on X (formerly Twitter) on May 24, 2026, Vembu acknowledged the transformative potential of AI technology itself but warned against the unprecedented scale of financial speculation surrounding it.
"AI is clearly an investment bubble. The justification is that all massive tech waves spark financial bubbles so saying it is a bubble doesn't negate the tech itself," Vembu stated. "And this one is the biggest bubble yet. How to navigate this without losing one's shirt is the key."
Vembu's comments came in response to a detailed analysis by the social media account "Bull Theory," which questioned the true demand for cloud computing services driving the current AI boom.
The Cloud Credit Conundrum: Bull Theory's Claims
Bull Theory's post outlined a mechanism where significant investments by major technology companies into AI startups are allegedly tied to agreements requiring those startups to spend the funds on the investing companies' own cloud computing services. This arrangement, they argue, creates a "recycled funding loop" that inflates both cloud revenue and startup valuations.
Microsoft and OpenAI: A Case Study
As a prime example, Bull Theory cited Microsoft's multi-billion dollar investment in OpenAI. According to the analysis, Microsoft provided OpenAI not just cash but "cloud credits" to utilize its Azure servers. OpenAI then used these credits to train its AI models, allowing Microsoft to record this server usage as new "cloud revenue."
"When Microsoft invested $13 billion into OpenAI, it didn't just give them cash; it gave them 'cloud credits' to use Microsoft servers. OpenAI used those exact credits to train its AI models, and Microsoft then turned around and recorded that server usage as brand new 'cloud revenue' from a customer," the post claimed, adding that this essentially means the tech giant is "literally paying itself with its own money and calling it a sale."
The post further alleged that OpenAI's annual cloud bill has purportedly soared to over $60 billion, double its actual revenue of $25 billion, sustained largely by this recycled funding.
Amazon and Anthropic: Similar Practices Alleged
The analysis extended similar claims to other major players, noting Anthropic's substantial spending on Amazon Web Services (AWS). Bull Theory suggested that Anthropic spent $2.66 billion on AWS in just nine months, an amount nearly equivalent to its total earnings during that period, indicating a similar funding dynamic.
Implications for Market Valuations
Bull Theory concluded that such practices allow AI startups to achieve soaring valuations, which in turn enables the investing technology companies to record gains on their investments, boosting reported profits even before these gains are realized through genuine market demand. While Vembu did not specifically comment on the detailed allegations made by Bull Theory, his broader statement on the AI investment bubble aligns with concerns about the sustainability and underlying economics of the current AI spending spree.