Nick Fountain

NVIDIA, of course, is the microchip company that's powering all this stuff, and its stock price, I think it has almost quadrupled over the past two years.

It's wild.

It's the most valuable company in the world.

Right.

We're going to look at some cutting edge research on bubble detection.

And we're also going to talk about this provocative theory, which says that maybe some bubbles are not as scary as they seem to be.

All right, before we can talk about whether we're in a big AI bubble or not, we've got to start with some definitions.

What is a bubble?

Robin Greenwood is a professor of finance at Harvard Business School, where for years he has been studying bubbles, especially bubble indicators, like how you tell if something is a bubble.

Now, bubbles have always kind of puzzled economists because how could people be so delusional?

But the thing about bubbles is that they usually involve something new, something exciting or unknown.

The kind of thing that gets people buzzing about at the gym at Harvard Business School.

You almost never see bubbles forming in boring or familiar industries.

You're never going to see bubbles in, say, ankle socks.

But is that a sign of a bubble?

Is a company like NVIDIA ridiculously overvalued?

It's hard to say what the company should be worth.

Kind of depends on what story you believe about whether NVIDIA's AI chips will change the world or not.

Here at Plenty of Money, we actually had Eugene Fama on the show way back in 2013, where he told us that in an efficient market, the price is usually right.

So how could bubbles exist?