I had a lively debate with a couple of clients this morning, with everyone trying to figure out whether we are on the verge of an AI bubble or just warming up.
The irony with big growth stories is that investors often worry about how the show ends before the curtain has even risen. Growth investing is a journey filled with potholes, flashing warning lights, and the occasional detour. Transformative technologies rarely stroll in on a red carpet, they climb up messy walls of worry.
In my humble view, AI will end in a bubble. That is not a forecast, that is just how booms behave. However, bubbles almost always run longer, grow bigger, and create more cultural chaos than skeptics expect. I still remember 1999 during the dot-com boom. Things were so absurd back then that today’s AI hype almost looks polite by comparison.
Remember that bubbles do not burst just because valuations look rich. Some of our positions in our model portfolios are hardly cheap but they are not peak-euphoria either. AI disruption fuels revenue growth, margins, and could see much bigger benefits once we get to the mass adoption stage.
The rush into AI will likely push the stock market to unbelievable heights over the next couple of years. Hey, most of us already use AI every day and it is hard to imagine going back.
So yes AI is inflating into a bubble but this is nowhere near the final act. Demand is real, supply is scarce, and the story still has legs. The last chapter will be written in psychology, momentum, and that one jaw-dropping “bell-ringer” event that everyone remembers years later. Until then, enjoy the ride and just keep your exit doors unlocked.