Is AI a Bubble?

Unleashing the Power: The Rise of Artificial Intelligence

Artificial intelligence (AI) has been making headlines for years, with many experts predicting that it will revolutionize industries and change how we live and work. As AI technology advances and becomes more widely adopted, it's natural to wonder whether we're in the midst of an AI bubble, similar to the dot-com bubble of the late 1990s or the more recent electric vehicle (EV) craze. In this article, we'll explore the background of AI, its adoption and extension, and its potential impact on the stock market.

From Hype to Reality: The Evolution of AI

AI has come a long way since IBM's Watson made headlines in 2010. AI was still in its infancy, and many were sceptical about its potential. Watson's initial failure to live up to its hype can be attributed to several factors, including the limitations of its natural language processing capabilities and the high costs associated with its implementation. But still, it didn't burst like a bubble but rather a gradual decline.

However, today, AI is here to stay, with some even claiming that it will be a revolution as big as the wheel or even bigger. AI is revolutionizing industries like healthcare, education, and customer service. Advancements in machine learning, natural language processing, and computer vision have led to significant growth. Large language models (LLMs) like LaMDA and GPT4, trained on vast datasets, can generate text, translate languages, create creative content, and provide informative answers. By 2030, AI could contribute $13 trillion to the global economy, according to McKinsey.

The AI Boom: Adoption and Extension Across Industries

AI is now being adopted and extended across various industries, with startups and established companies working to integrate AI technology into their products and services. AI transforms how businesses operate and compete, from healthcare and finance to manufacturing and retail. For example, AI-powered chatbots are revolutionizing customer service, while AI-driven analytics are helping companies make more informed decisions. In 2020, the global AI market was valued at $62.35 billion, and it is expected to grow at a compound annual growth rate (CAGR) of 40.2% from 2021 to 2028, according to Grand View Research.

AI vs. EV and Dot-Com Bubble: Unveiling the Differences

While it's tempting to draw parallels between the current AI boom and the dot-com bubble or the EV craze, there are some key differences to consider. During the dot-com bubble, many websites failed to deliver on their promises, leading to the eventual collapse of numerous businesses. In contrast, AI building block companies are more likely to succeed, as their technology has the potential to revolutionize industries.

While the market for EVs has grown a lot and attracted much speculation, it's unclear if it has created a bubble. The same uncertainty applies to stocks related to AI. It's difficult to predict if AI will go through a similar situation because we can only identify a bubble after it has happened. However, the AI market didn't crash in 2011, which shows that it has the ability to recover and make a strong comeback. The graph for Tesla provided here shows the excitement around EVs, a technology with clear and predictable uses, unlike cryptocurrencies. Instead of a sudden bubble burst, the graph shows a gradual decrease in interest over time.

The Future of AI Stocks: Riding the Wave of Innovation

As AI continues to gain mass adoption, it's likely that companies serving as AI building blocks, such as Google, Microsoft, Nvidia, AMD, SMTC, etc., will experience significant growth in the coming weeks and months, "The final stretch". However, as with any rapidly growing industry, there will likely be some degree of correction.

The launch of OpenAI's GPT, a powerful language model, has significantly impacted stock prices, including Microsoft and other companies. As the market reacts, the question remains: how high will they rise before a correction occurs?

Concluding Thoughts: AI's Unstoppable Influence

While it's impossible to predict whether AI is a bubble, it's clear that the technology is here to stay and will continue to impact various industries significantly. As AI advances and becomes more widely adopted, we'll see even more innovation and growth in this exciting field. With the potential to add trillions to the global economy and transform industries, AI is undoubtedly a force to be reckoned with.