The term “AI bubble” refers to a theorized financial or stock market bubble occurring during the current period of rapid advancement and intense investment in Artificial Intelligence technology, often called the “AI boom.”
It essentially describes a situation where:
- Inflated Valuations: Companies developing AI technologies—especially startups and certain large tech firms—have stock prices and valuations that are significantly higher than their current revenue streams or proven profits can justify.
- Hype and Speculation: Investor enthusiasm for AI’s potential is extremely high, driving massive investment and funding decisions based on projected future growth and transformative impact rather than demonstrated current returns.
- Risk of Correction: If the actual growth, profitability, and widespread adoption of AI applications fail to meet these ambitious expectations, the bubble could “burst,” leading to a significant and sudden drop in stock prices and investment losses, similar to the dot-com bubble of the late 1990s.
Many industry leaders and analysts acknowledge the possibility of an AI bubble, but they often stress that unlike previous bubbles, the underlying AI technology itself is “real” and has the potential to fundamentally change industries.
‘Add Amazon (AMZN) founder Jeff Bezos to the growing list of people calling Wall Street’s AI craze a bubble. During a conversation at Italian Tech Week, Bezos said the artificial intelligence hype cycle is pushing investors to spend billions on both good and bad ideas.’
Source: https://finance.yahoo.com/news/amazon-founder-jeff-bezos-says-ai-bubble-is-real-but-so-is-the-technology-155627873.html
The debate is often whether the current valuations accurately reflect that potential or if they are based on over-exuberant speculation.