The biggest video generating tool is no more – is the AI bubble bursting?

When ChatGPT came on the scene in 2022, Silicon Valley-types immediately compared AI to the dawn of the internet in the 1990s.

OpenAI received the same fanfare when it unveiled Sora two years later. By typing a sentence or two into a box on a phone screen, a user could generate a short video that looked straight out of Hollywood.

Disney even signed a three-year $1 billion deal to allow Sora users to forge clips using characters like Mickey Mouse, Cinderella or Yoda.

Yet OpenAI abruptly announced yesterday that it is pulling the plug on its Sora consumer app and internet service. No reason was given.

‘To everyone who created with Sora, shared it, and built community around it: thank you. What you made with Sora mattered, and we know this news is disappointing,’ OpenAI said in a post on X.

OpenAI confirmed to Metro that it would continue to use video-generation technologies to teach skills to robots.

‘As we focus and compute demand grows, the Sora research team continues to focus on world simulation research to advance robotics that will help people solve real-world, physical tasks,’ a spokesperson added.

Disney told Metro it ‘respects OpenAI’s decision to exit the video generation business’ and is keen to license its property to an AI company.

AI enthusiasts and critics alike were taken aback by the overnight end of Sora. Only the day before, OpenAI published a blog post about how to safely create content with its ‘state-of-the-art video generation’ app.

Some, however, weren’t exactly surprised. After all, Sora got into hot water last year when people created videos with copyrighted material.

But almost all began to wonder the same thing – is Sora’s end a sign that the AI bubble is about to burst, as the Bank of England feared last year?

Metro spoke with nearly a dozen financial analysts, AI experts and stock researchers about whether this will happen.

There were mixed feelings.

Is the AI bubble about to burst?

‘Every bubble starts with a story people want to believe,’ says Dat Ngo, of the trading guide, Vetted Prop Firms.

‘In the late 90s, it was the internet. Today, it’s artificial intelligence.

‘The parallels are hard to ignore: skyrocketing stock prices, endless hype and companies investing billions before fully proving their business models.’

In 2000, dot-com whizzes were minting easy millions from internet start-ups. When interest rates were hiked, investors sold off their holdings, companies went bust and people lost their jobs.

Some stock researchers worry that the AI boom could lose steam when the companies spending billions on the tech see profits dip.

Tech giants are spending serious money on the data centres that power AI this year: Amazon is spending $200 billion; Google, $185 billion; Microsoft, $114 billion and Meta, $135 billion. (As a video-generation service, Sora required dar more computing power than most consumer AI products.)

Yet Dr Alessia Paccagnini, an associate professor from the University College Dublin’s Michael Smurfit Graduate Business School, says that shoppers are spending $12 billion. That’s a big difference.

AI-focused stocks are mainly in US markets but as so many investors across the world have bought into it, a fallout would be felt globally.

Dr Paccagnini adds: ‘As a worst-case scenario, if the bubble does burst, the immediate consequences would be severe – a sharp market correction could wipe trillions from stock valuations, hitting retirement accounts and pension funds hard.’

‘In my opinion, we should be worried, but being prepared could help us avoid the worst outcomes.’

‘AI hype is overly optimistic’

Despite scepticism, AI feels like it’s everywhere these days, from dog bowls and fridges to toothbrushes and bird feeders.

And it might continue that way for a while, even if not as enthusiastically as before, says Professor Filip Bialy, who specialises in computer science and AI ethics at the Open Institute of Technology.

‘AI hype – an overly optimistic view of the technological and economic potential of the current paradigm of AI – contributes to the growth of the bubble,’ he says.

‘However, the hype may end not with the burst of the bubble but rather with a more mature understanding of the technology.’

Leeron Hoory, a finance journalist at BusinessHeroes, adds that calls for caution are, much like AI technology itself, premature.

She says that the tech industry has a history of spending big to deliver change, as it did with the computer revolution – and that took five years before any sort of reckoning came.

‘But AI isn’t a passing trend like the dot-com rush,’ Hoory says, ‘it’s an infrastructural shift that will underpin everything from logistics to medicine to governance.

‘The market isn’t overheated – it’s still catching up to the scale of what’s coming.’

Get in touch with our news team by emailing us at webnews@metro.co.uk.

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