I keep hearing that phrase. "The AI bubble is going to burst" but...
What does it means? What impact will that have for regular people? Will it truly happen? What does needs to happen for it to burst?
I only want apps to stop embedding any for of AI as a new function, hate it
Everybody talks about the AI bubble going to burst, but how? And what are the implications for the small investor?
People who go on about the AI bubble popping? Its bizarre to me
Can anyone explain how the AI bubble will "Pop"?
Questions for people who think there is an AI bubble now and it will pop soon
Videos
During the 2008 financial crisis the housing bubble burst because of mortgages to unqualified borrowers, complex financial products like mortgage-backed securities (MBS), and lax lending standards. So, a faulty system depending on we, the people, paying off mortgages and loans that were not being paid back. Seems a logical cause for a bubble to burst.
Before, the dotcom bubble bursted because of extreme overvaluation of companies, which were not performing up to the expectations, so the revenue wasn't there.
Now there is obviously an AI bubble as has been pointed out many many times, but currently the companies involved are still meeting their expected revenue goals (looking at NVIDIA, Meta, Google even though that is not strictly an AI-related company, their current valuation is also due to their AI developments). Of course, investing in each other and buying each other's products, causing stocks to rise, is super inflatory, but is not punished so far. It seems.
Now, a geopolitical conflict involving a certain chipmaker to not be able to produce would likely pop the bubble overnight. Given the current geopolitical situation and the people involved, this is not unlikely in the coming years. But as long as this doesn't happen it appears to be business as usual, and the AI-race will continue.
Now, comparing this to earlier bubbles, the pattern is similar. An industry is pumped to the moon, a bunch of people make an insane amount of money, the bubble bursts and most people get screwed over with a few winners. The question is always: how high will it go when the companies are profitable and how deep will the lows be?
As a retail investor who is not trading daily, this situation is extremely difficult and hard to predict when also just having a regular 9 to 5 job. I know I won't be able to predict it, so it is a risk analysis whether the current valuations will be the future lows OR if big companies with PE ratios of 50 are already a selling sign for the retail investor. This would even apply to ETFs like VWRL, since their share of NVDA is also high. The whole market will likely go down when this bubble bursts, just some companies more than others. given earlier arguments, I feel like going short here is stupid. Thereby, world governments are hedging inflation (buying loads of gold), which also has geopolitical implications. Now I believe in the mantra that time in the market beats timing the market but probably needing the money in 3 years or so, the current situation is a spicy sauce. It seems like hedging inflation (e.g. buying gold and funds like Berkshire) is not a bad move.
I read a lot of posts convinced that the AI bubble is going to pop and will result in data centres and all the money invested will become wasted.
I think these types of people are only using Chatgpt to ask it about the weather. I don't believe they are involved in anything that actually uses AI in business or functionality.
If you are a coder, you fully well know this technology is not going anywhere. It is far too useful. Getting it to analyze codebases, throwing 20 documents at it to analyze and build something out of it. Then you have all the industries it helps, example legal, customer service, art design etc.
We cannot get enough compute at the moment, AI models are always being quantized and compressed to make them more efficient because it is far to costly to run at full power.
Not to mention robots on the horizon and all the chip and ai requirements they will have.
You might get some AI companies going bust due to competition, but the demand will be transferred to another company.
It is the next industrial revolution. You see the uproar when Chatgpt goes down.
EDIT:
As others have siad we have two definitions of the AI bubble
People that think AI is going away and artists will be back in employment in pre 2020 numbers. I've seen many posts like this in some art focused reddits.
The AI companies financial status. What could actually disrupt this biggly is imagine a super model, like how Deepseek sometimes throws a spanner in the works, if a model can exist to be crazy efficient and we can get SOTA performance on regular gpus?