It is not a bubble, because it is the real deal, a BFD, just like the internet was and is the real deal. I've been saying you ain't seen nothin' yet, and I stand by that. Productivity gains are undeniable where there are gains (not all AI in business has gains). The AI of 2040 and 2050 will blow your socks off, and a robot will pick them up and hand them back to you.
It IS a bubble because the market and the companies are getting ahead of their skis. AI is being over-promised just like the internet was over-promised in 2000. Bubbles form when people think markets have changed and will not decline significantly going forward. General intelligence AI is coming, but not in this iteration.
The internet required a few innovations (fibre, broadband) and lots of build out to deliver in the 2010s what was promised in 2000. So it is with AI. Nvidia is likely to survive just like Intel of 2000 survives more or less in 2025, and IBM of 1975 survives in 2025.
I think anyone who believes the market won't decline at least 50% from the coming top is in for a shock. In 2000 the NASDAQ topped over 5,000 and fell about 80% to around 1,000 by about 30 months later. It took 15 years, fifteen years, to get back to 5,000. But it has increased from there. In the last 3 years it has doubled and is now about 24,000.
How does a bubble that is not a bubble burst? When the real world intervenes. Do not lose sight of macro economics. Bull markets longer than three years (coming up) are the exception, not the rule (a bit less than two is average). Projections of unending growth are only projections.
There will be a recession. We do not know when. The seeds are already growing. A) Supply chains are disrupted (tariff taxes). B) Labour supply is disrupted (deportation fears). C) Infation is stubborn, though not terrible. D) US national debt is growing out of control due to billionaire tax cuts and none for consumers. E) Consumer wages have not kept up with cost of living, cost of housing, or productivity. F) The stock market is increasingly frothy with over-valued IPOs. G) AI implementation in business is not easy or smooth (85% of pilot projects get nixed before roll out). H) Social disruption may be coming, in the form of militarization against citizens and election disruption. I) There are other risks that don't come to mind immediately.
The situation is that for the market to continue rising steadily the way it has, everything has to go almost perfectly. The stock market over-valuation by the Shiller (Nobel laureate) CAPE index https://www.multpl.com/shiller-pe , at 40.9, is above 1929 levels (31.5) and almost as high as dot-com bubble got to (44.2).
Don't bet against AI. Bet against the bubble, conserve cash, and buy the bottom because AI is the real deal. The timing and details are up to you because I do not have a crystal ball. But history rhymes even though it does not repeat.
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