Bill Gates to AI companies: You are over valued and a reasonable percentage will ...

Bill Gates, co-founder of Microsoft, has issued a warning about the future of many AI companies. He believes that a significant number of these companies, currently boasting extremely high valuations, will not succeed in the intensely competitive AI market.

Speaking at Abu Dhabi Finance Week, Gates told CNBC's Tanya Bryer that investors should prepare for market corrections. He suggested that the fear of an AI bubble is growing daily. Gates emphasized that only a small portion of AI companies will become long-term successes due to the industry's hyper-competitive nature. He stated that "a reasonable percentage of those companies won’t be worth that much."

While acknowledging the risk of inflated valuations, Gates remains optimistic about AI's potential. He described AI as "the most important thing going on." He stressed that high valuations alone don't guarantee success. He clarified that the AI sector is a bubble only in the sense that not all high valuations will continue to climb; some will inevitably decline.

Investor concerns have been rising, fueled by the disparity between companies like Tesla and Palantir, which trade at price-to-earnings ratios above 200, and the S&P 500 average of around 25. These concerns contributed to global market dips in November amid fears of an AI bubble.

Despite his valuation concerns, Gates reaffirmed his belief in AI's transformative power. He highlighted its potential to revolutionize healthcare, education, and agriculture—areas where his foundation is actively investing. He described AI as a "deeply profound technology that will reshape the world," emphasizing its capacity to deliver substantial benefits for humanity, not just profits, by 2026. He stated that “Is this profound and real and is going to provide all of these benefits? Absolutely, nobody should have any doubt about that.”