One of the great fears of the financial world are bubbles, they have existed on many occasions and have caused great damage to the economy. Bubbles have some characteristics that could alert many people, however, when the bubble bursts is when everyone becomes aware of its existence, for that reason it is necessary to be informed in many fundamental aspects regarding investments and even economic policy, beyond the price development that is usually shown in the graph as a rise without a ceiling.
Surely many will remember one of the most famous bubbles in the technology sector, the dotcom bubble, perhaps some were very young and others can recall the collapse of many companies that absorbed a lot of cash from investors, but in the end did not succeed in their business.
The interesting thing, from my point of view about the dotcom bubble, is that it was a technology sector with an impressive boom, literally a shift within the internet that would undoubtedly affect the whole world. The expansion of the internet brought about changes in our society and certainly humanity had a major change in daily life due to technological advances.
If we look at artificial intelligence, it is another revolution from a technological point of view that, like the expansion of the internet, will change many aspects of our lives, our work and the way we get information.
Investors want in on AI
It is no secret that many investors want to get into the artificial intelligence business, so they may put money into expanding their portfolio of holdings in AI-related companies. The price movements seen in the charts are impressive. I have previously discussed Nvidia, who is currently the most relevant company for sophisticated AI chips, a chart that shows such impressive growth that many may remember the early millennium boom in dotcom companies.
Reasons for the bursting of the dotcom bubble.
In short, this bubble burst because the money that was invested in the sector did not get the desired returns, the companies on the stock exchange were accepted in large numbers and offered shares and debt bonds that investors bought just not to be left out of a technological revolution, however, the sector reached a point where few companies succeeded and many went bankrupt or were absorbed by the competition.
The sell-off was massive because there was no longer an opportunity for expansion in the sector at the time, there were more companies than there was profit to be made.
Why AI is not a Bubble?
At the time of this writing the Artificial Intelligence sector is safe and sustainable, because it is still in early stages where there can be a lot of expansion in the sector, undoubtedly the best of AI has not yet been seen and all its functionalities have not been exploited in various sectors where they can have relevance.
This possibility of expansion, in addition to the fact that for now there is no ceiling in terms of development and usability, guarantees in a way, that this technological sector can continue to grow with investors' money for several more years.
Could it become a bubble in the future?
There is no denying the possibility that greed and the famous FOMO or fear of being left out and no longer making money, may cause investors to flood the sector with cash at a time when it no longer has the capacity to expand or grow so that profits are attractive to investors or so that companies can have the necessary income to cover their expenses.
It is important to take into account technological aspects where AI can have usability and profitability so that companies can make profits, in addition to all this, price volatility may be an indication, however, in particular I think that there is no visible bubble in the sector, so it can be a type of investment of the most profitable in these times and Nvidia is a very clear example of that.
Posted Using InLeo Alpha
Totally agree with u. It's technology that is shaping the modern civilization.
AI will further produce a new class, different from the middle class being produced by Blockchain. And AI will only go sophisticated in time to come, so u should be bullish on this for generations.