How do I think of today’s AI craze relative to past bubbles? 🫧🤖🚂🚗

Plus a charted review of the macro crosscurrents 🔀

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Will AI prove to be a bubble like what we experienced 25 years ago with the Internet boom?

Financial author Phil Rosen asked me for my thoughts on his show, “Full Signal.”

I think we should be both optimistic about the future, but also concerned about how things will unfold as we get there.

Whenever you have a game-changing breakthrough in innovation and technology, the excitement over the opportunity will inevitably lead to an overshoot in investment.

As I’ve written for the past two years, I think the potential for AI is massive. Across industries, companies have identified ways to use AI to do things more quickly and often more cheaply. This is the fundamental offering of productivity-enhancing technology: It saves you time and/or money.

People will pay to save time and money. And economics 101 teaches us that where there’s demand, there will be supply.

And that supply is coming with eye-popping amounts of investment, with mountains of cash financing capital expenditures, tons of venture capital flowing into new startups, and lots of savings getting reallocated into the publicly traded companies advancing AI technology.

A lot of those investments will prove lucrative. And a lot will flop.

This behavior is not new. It echoes past technological breakthroughs.