The AI bubble
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Are we currently in an AI bubble and what signs point to it?
Are we in an AI bubble? A simple answer is we better hope not. You are far too young to remember tulip mania in 1637. Google it. But perhaps you remember the housing bubble that caused the 2008 great financial crisis.
It was the worst day on Wall Street since the crash of 1987. Shock and panic evident on the faces of those on the trading floor. How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills?
Raise their hand. When bubbles pop, there's pain. But while consensus is growing that we are in an AI bubble, there's a fight raging over what type of AI bubble we're actually in and what will happen when she goes pop. What to keep your third eye open for coming up on Today Explained.
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Introducing Odoo. It's the only business software you'll ever need. It's an all-in-one, fully integrated platform that makes your work easier. CRM, accounting, inventory, e-commerce and more. And the best part? Odoo replaces multiple expensive platforms for a fraction of the cost. That's why over thousands of businesses have made the switch. So why not you? Try Odoo for free at odoo.com. That's O-D-O-O dot com. 2025 has been a boom year for the stock market, despite a ton of economic uncertainty. Powering the boom is AI. Big investments, big faith in AI. Does AI deserve it or is this a bubble? Lily Jamali covers technology for the BBC. Lily, let's start this way. What is a bubble?
That is a great question. A bubble can take hold when there is an expectation of future profits. And when that expectation is so alluring that it ends up leading to speculation. So there's a long history of boom-bust cycles in our country, and it's not always clear when you're in one. Even when you think we're in a bubble, the timing of that can get pretty tricky.
At the moment, everybody's talking about an AI bubble. Why is that?
I think it's because of, first of all, all the interest in artificial intelligence. You know, I live in the San Francisco Bay Area, and when I drive down the 101 freeway, it is all billboards about AI, right? So there you go. That's sign number one. What are the billboards on the 101 saying? But more significantly, I think there's a real concern right now about the potential blast radius that an AI bubble bursting could have because there's just so much money pouring into artificial intelligence. So take a company like OpenAI, which brought artificial intelligence into the mainstream industry. Thank you so much. Its mission at the time was to create artificial intelligence tools for the benefit of humanity.
Fast forward a few years and Altman has been reorienting the company to be more of a for-profit enterprise. So they've been taking investor money left and right to the point now where OpenAI is valued at $500 billion. It is the most valuable private company anywhere. And so you might think, well, if anything goes wrong, it's those people who've been able to invest that are gonna be affected. The thing is, OpenAI and some other AI developers have been taking investments from publicly traded companies, companies that you and I can invest in and that we actually might already own through our retirement funds without even knowing it. So there's this growing web of deals and sticking with OpenAI, let's look at that.
NVIDIA, the AI chip designer, is invested in OpenAI in a big way.
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