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The blistering growth of artificial intelligence investment has left many market watchers with a familiar, uneasy feeling. So as billions of dollars flow into chip makers, data centers and startups, the question on everyone's mind looms -- are we in an AI bubble?

According to Microsoft co-founder Bill Gates, the answer is "yes" -- but with some heavy qualifiers.

Gates was quick to clarify that not all bubbles are created equal in an Oct. 28 interview on CNBC. And that from his perspective, the AI frenzy is far from "tulip mania," and instead bears a much closer resemblance to the internet's nascency.

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Tulip mania, a 17th-century speculative frenzy in the Netherlands, saw tulip bulb prices soar to astronomical levels before collapsing in spectacular fashion. The key takeaway from that historical event, Gates told CNBC, is that the underlying asset was ultimately trivial. "They were just tulips," he said.

The current AI boom, however, is built on something profoundly different. "[AI] is so profound and therefore its influence is hard to overstate," he said.

He pointed to the immense economic value of creating accessible, powerful intelligence, from providing medical advice and personalized tutors to accelerating drug design. This foundational potential, much like the creation of the internet, justifies the massive financial commitments, even if the path is rocky.

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And the path won't always be rosy, he told CNBC. "Absolutely, there are a ton of these investments that will be dead ends," he said. He pointed to some of the specific risks companies face, such as building data centers in locations with prohibitively expensive electricity or investing in a generation of computer chips that becomes obsolete before its value is fully captured.

Yet, he said, for major tech companies, sitting on the sidelines is not an option. "If you want to be a tech company, you don't get to say, 'No, let's check out of this race,'" Gates said. This sentiment echoes the early days of the internet, where companies that hesitated to embrace the web were left in the dust.

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Acknowledging the Real-World Headwinds

The interview also touched on two significant societal pushbacks: soaring energy demands and fear of job displacement.

On energy, Gates advocated for smart placement and next-generation solutions, specifically mentioning his company, Terrapower, and its advanced nuclear reactors. "We need to make sure to pick locations where the economics and the political acceptance is very, very strong," he told CNBC. "We don't have permission to drive up people's electricity costs."

Gates also addressed one of the biggest AI elephants in the room -- the impact on jobs -- with candor. "Yes, although it hasn't been seen in large numbers, over the next several years, there will be some impact on the job market," he said. "It's only honest for people to speak frankly about the fact this will have a big effect on the job market."

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Image: Imagn

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