Are we in an AI bubble?
Anyone asking this question is missing the forest through the trees. We are embarking upon something that only happens a couple times in one's entire lifetime.
This is a paradigm shift. Many compare it to the Internet era, which has some validity. Naturally, this sparks the discussion about "bubble" and whether this will resemble the Dotcom period.
During that timeframe, we did see a market correction. It was massive, something that was not aided by 9/11. However, nothing that occurred derailed the march of the Internet. It was transformative for society, albeit taking a few decades to take hold.
Actually, the Internet explosion really took place as a result of mobile. That is what put the Internet into the hands of billions. It altered cultures, changed how societies operated, and "made the world smaller".
The AI age is upon us. What will happen will not duplicate the Internet; it will far exceed it.
The AI Paradigm Shift
Let me start by saying that markets can always correct. There is nothing that says markets will go up forever. In fact, believing in this is buying into fantasy.
Markets go up and they go down.
Are things overpriced? This is a question analysts all over the world are always asking. This time is no different.
Of course, we get mixed results. Some conclude that valuations are absurd whereas other point to the transformative nature of things.
How this will unfold is up to speculation. Nevertheless, whatever happens in the markets is not going to slow the trends that are in place.
When societies are completely altered, there are winners and losers. This gets accelerated as technology progresses further.
Ultimately, this provides opportunity.
Winning During A Shift
The 1800s saw a number of paradigm shifts. We saw the Industrial Revolution kick off which created that eras billionaire class. These individual were known as the "Robber Barons" due to their unethical practices, which later became illegal.
We know the names of this individuals, totally a few dozen at most.
If we fast forward 100 years, the computer age sprung another class of wealth. We had the likes of Bill Gates and Larry Ellison starting their ascent. Silicon Valley created more wealth than anyone had seen before.
This was outdone by the Internet age. Here we had the Google boys, Mark Zuckerberg, Jeff Bezos, and others who joined the ranks.
What is key is that with each passing generation, the next level also grew. Microsoft was once know where the average employee was worth over $1 million due to their stock options.
Just think of the wealth that exists within Google, Amazon, Meta, and other companies for those who weren't necessarily the founders but came in a few years later. Many of these people are worth tens of millions of dollars.
The Age Ahead
The AI paradigm will usher in even more wealth.
Here is where things do get interesting. Some forecasters are starting to question what does money even mean in the age of hyper-abundance. Over the next 10-15 years, if we see a massive increase in the capabilities of AI and robots, what role will money have.
Some call this the post-labor economy. Whatever the term, how do things look?
If history repeats itself, the top end will have even greater numbers. This will also mean the secondary layer also grows. It could be a 5-10X on what the Internet produced.
We also have to keep in mind how technology is deflationary.
The Internet brought us basically free video, music, communication, and images. What will AI bring?
So far, we are dealing with essentially free cognitive ability. Just consider the potential there.
Posted Using INLEO
Really enjoyed this take! I think anyone worrying about an “AI bubble” is missing the bigger picture. AI is here to stay and will likely far exceed the Internet. As for investing, and whether we’re in a ai bubble etc I do my research, pick companies I believe in, and hold for at least 5 years while dollar-cost averaging. I think that helps smooth the ride well it has for me.