Arm co-founder Hermann Hauser’s AI warning: The revolution is real, but so is the bubble risk

This report is from this week's The Tech Download newsletter. Like what you see? You can subscribe here.Few investors can claim to have witnessed every major technology wave of the last four decades. Hermann Hauser co-founded Acorn Computers in 1978, helped create Arm — one of the world's most critical chip companies — and today backs some of Europe's most important deep-tech startups through Amadeus Capital.When I sat down with Hauser this month for The Tech Download podcast, our conversation ranged from artificial intelligence and semiconductors to quantum computing and Europe's fight for technological sovereignty. His central message was striking amid concerns over hype and valuations."This is a revolution that will create more value than probably any other technology revolution that we've ever seen," Hauser told me. But it will be a "rollercoaster." What did he mean? He said some valuations have "clearly gotten ahead of themselves," and cited risks related to recently announced circular financing deals.But he also argued that the largest players are unlikely to disappear. Companies such as OpenAI and Anthropic, backed by significant capital reserves, should be able to withstand periods of turbulence even if market expectations are reset.Hauser's role in the creation of Arm also makes him an authority on semiconductors. Chip companies have clearly been among the biggest stock market winners over the last few years as investors poured money into the "picks and shovels" of the AI boom. But something is changing.Right now, AI is expensive to run, chips are difficult to cool, memory is expensive and there are bottlenecks across the industry. This is forcing a rethink of computing architecture.Hauser highlighted emerging technologies such as in-memory computing and photonic computing, which seek to dramatically reduce the energy consumed by moving data between processors and memory.The changes, he argued, could prove as significant as the architectural breakthroughs that ultimately helped Arm challenge established chipmakers. "I never thought that we'd have a very fundamental change in the computer architecture as a result of AI," he said.Hauser is a powerhouse of the European tech scene and uniquely placed to comment on the continent's position in the AI revolution. Can Europe compete with the U.S. and China?Hauser is adamant European companies have the innovation and skill to do so. But the big issue is how European companies struggle to grow from a small startup to a truly global competitor, Hauser said.That challenge ties into a broader concern that increasingly dominates Hauser's thinking: technological sovereignty.He worries Europe remains heavily dependent on foreign suppliers for critical technologies ranging from AI models to semiconductor design software. Maintaining close cooperation with allies is essential, he said, but dependence carries risks in an era of rising geopolitical tension and export controls.His conclusion was blunt. Europe should preserve its partnership with the U.S., but it should not become "a technology colony of the U.S."Listen to the episode to find out more of what this tech industry heavyweight thinks.News editOne more thingOver the past two weeks, OpenAI, Anthropic and Meta all revealed that their AI models went rogue during routine security testing. In explaining what happened, the companies each mentioned the same small Israeli startup: Irregular.My colleague Jonathan Vanian digs into how the three-year-old company found itself at the center of the storm.