Zoho founder and Chief Scientist Sridhar Vembu on Sunday described Artificial Intelligence (AI) as an investment bubble, arguing that while the technology itself is real, the scale of financial speculation around it may be unprecedented.

"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 wrote on X. "And this one is the biggest bubble yet. How to navigate this without losing one's shirt is the key." 

Vembu was responding to a post by a social media account called Bull Theory, which argued that the current AI boom may be overstating real demand for cloud computing services.

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In a lengthy post, Bull Theory claimed that OpenAI and Anthropic together account for more than half of the future cloud backlog reported by major technology companies, including Microsoft, Oracle, Google, and Amazon.

The post alleged that large investments made by technology companies into AI startups are often tied to agreements requiring those startups to spend the funds on cloud computing services provided by the same companies.

As an example, the post, citing reports, pointed to Microsoft's multibillion-dollar investment in OpenAI, arguing that cloud credits provided as part of the investment were subsequently used by OpenAI to purchase computing resources from Microsoft.

"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 said, adding that the tech giant is literally paying itself with its own money and calling it a sale.

"This is why OpenAI's annual cloud bill has ballooned to over $60 billion, double its actual revenue of $25 billion, kept alive solely by this recycled funding loop."

The post also cited Anthropic's spending on Amazon Web Services and claimed that such arrangements create a feedback loop in which investment capital is recycled into cloud revenue. "Anthropic runs the exact same play, spending $2.66 billion on Amazon Web Services in just nine months, which was basically 100% of all the money it earned at the time."

The post further argued that rising valuations of AI startups allow technology companies to record gains on their investments, boosting reported profits even before those gains are realised.

Vembu did not comment on the specific claims made in the post.