Enthusiasm about artificial intelligence has propelled markets to record highs this year. But the fierce ascent has also raised concerns about a bubble.
AI has been the dominant theme in markets since 2022, when OpenAI first launched ChatGPT. Optimism has since spread among investors about a potential transformative AI boom, and enormous amounts of money have flowed into tech stocks. Valuations have risen to historically expensive levels.
To some analysts and economists, those are red flags that the market might be in a bubble — when investors bid up stock prices beyond what they’re worth, creating an unsustainable rally that often results in a significant downturn, as seen during the dot-com bubble that burst in 2000.
“Fired up by optimism about the productivity-enhancing potential of AI, global equity prices are surging,” Kristalina Georgieva, managing director of the International Monetary Fund, said in a speech on Wednesday.
“Today’s valuations are heading toward levels we saw during the bullishness about the internet 25 years ago,” Georgieva said. “If a sharp correction were to occur, tighter financial conditions could drag down world growth.”
Jamie Dimon, chief executive at JPMorgan Chase, said he thinks “AI is real,” but some money being invested now will “probably” be wasted.
“Take AI, there’s a lot of money going into it,” Dimon said in an interview with the BBC. “AI is real, AI in total will pay off. Just like cars in total paid off, and TVs in total paid off. But most people involved in them didn’t do well.”
Dimon also said he thinks there is a higher chance of a meaningful drop in stocks in the next six months to two years than what is being reflected in the market.
“I am far more worried about that than others,” Dimon said. “I would give it a higher probability than I think is probably priced in the market and by others.”
“The level of uncertainty should be higher in most people’s minds than what I would call normal,” he said, adding that geopolitics and government debt burdens are contributing to the uncertain outlook.
