this post was submitted on 28 Aug 2025
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Well it's "here to stay" I agree. But there are some real economic indicators that it is also a bubble. First, the number of products and services that can be improved by hamfisting AI into them is perhaps reaching critical mass. We need to see what the "killer app" is for the subsequent generation of AI. More cool video segments and LLM chatbots isn't going to cut it. Everyone is betting there will be a gen 2.0, but we don't know what it is yet.
Second, the valuations are all out of whack. Remember Lycos, AskJeeves, Pets.com etc? During the dotcom bubble, the concept of the internet was "here to stay" but many of the original huge sites weren't. They were massively overvalued based on general enthusiasm for the potential of the internet itself. It's hard to argue that's not where we are at with AI companies now. Many observers have commented the price to earnings ratios are skyhigh for the top AI-related companies. Meaning investors are parking a ton of investment capital in them, but they haven't yet materialized long-term earnings.
Third, at least in the US, investment in general is lopsided towards tech companies and AI companies. Again look at the top growth companies and share price trends etc. This could be a "bubble" in itself as other sectors need to grow commensurate to the tech sector, otherwise that indicates its own economic problems. What if AI really does create a bunch of great new products and services, but no one can buy them because other areas of the economy stalled over the same time period?