Former hedge fund manager Whitney Tilson is doubling down on his call that we're in an AI bubble ready to burst — here are his warning signs.

AI Bubble Warning Signs

The artificial intelligence sector is still firing on all cylinders, with the build-out of data centers seeing trillions of dollars spent on future growth.

That high spending is one of the many reasons why Tilson sees similarities between the dot-com bubble and an AI bubble.

In a recent blog post, Tilson highlights a Wall Street Journal post that calls the AI build-out the biggest economic bet in U.S. history. Tilson highlights a chart that shows that five companies make up a large amount of the spending on AI infrastructure.

Those five companies are Alphabet Inc Alphabet (GOOGL), Amazon.com Inc Amazon (AMZN), Meta Platforms Inc Meta Platforms (META), Microsoft Corp Microsoft (MSFT) and Oracle Corp Oracle (ORCL).

Tilson said so much of future AI growth being built on debt is a risk.

"I still believe it's a bubble. It reminds me in so many ways of the Internet bubble," Tilson said.

Here are the eight similarities Tilson sees from then to now:

• Unproven business models
• Unprecedented losses
• Looming regulation
• High-quality, low-cost competition from China
• Narcissistic CEOs
• Massive circular financing
• Rising debt, worsened by huge off-balance-sheet financings
• Young investors mocking their elders for not understanding the new paradigm

While there are multiple similarities for Tilson between the dot-com bubble and now, he said it could take some time for the AI bubble to burst.

"None of this means the bubble is about to burst anytime soon. I never cease to be amazed by how long obvious bubbles can inflate and the size they can reach."

When Will AI Bubble Pop?

"I think a key test of the AI boom will be the upcoming IPOs of leading LLM makers Anthropic and OpenAI," Tilson said.

The investor said both companies are losing money, while seeking trillion-dollar-plus valuations.

"If Anthropic and OpenAI successfully go public at such high valuations, it will fuel their massive spending – and keep the bubble inflating – at least for a while."

Tilson predicts that Anthropic will go public by mid-2017 with a valuation close to $1 trillion. As for OpenAI, Tilson is skeptical the company will ever go public.

"If I'm right that OpenAI fails to go public, it could quickly run out of money and fail spectacularly. And that would drag down the entire sector."

Tilson said another catalyst that could see the AI bubble burst was on display last week with Oracle's "force majeure" notice for the Project Jupiter AI data center in New Mexico.

The former hedge fund manager says the notice comes as lenders are showing signs of unease about exposure to Oracle.