Yes and No.
Human revolutions reshape societies and economies completely. AI is no doubt the newest major revolution. It's reshaping how humans do work, how efficient we are, how productive we are, how we gain knowledge, and much more. And it’s striking a chord. ChatGPT, the most successful AI product, has 700 million weekly active users.
The right question might not be "Are we in an AI bubble?" It's how much bigger will the bubble get? We could be very early in the bubble. If the AI industry gets 10 times bigger and then eventually crashes 50%, that’s still 5 times bigger than today. I just listened to a talk from Sequoia, who is calling this era "the Cognitive Revolution," and predicts it will be a $10 trillion industry. This is a good term that captures the value in AI. AI is the first technology that genuinely augments human cognition and knowledge itself. Intelligence is valuable, extremely valuable.
However, the traditional markers of a bubble are certainly present in the AI space. Here are some examples:
Domain Name Frenzy: AI domains have gone crazy. It's almost impossible to get a decent AI-related domain name.
Corporate Pivots: Huge companies that were created pre-AI, like Workday and Airtable and many others, have all but pivoted to say they are now an AI company. Every earnings call, every product announcement, every marketing campaign now leads with AI capabilities, whether meaningful or not.
Astronomical Valuations: NVIDIA is worth $4 trillion, more than any company in the world. It's worth more than all European companies combined. A semiconductor company has become the most valuable entity on Earth purely because it makes the chips that power AI. Venture capital is also pouring into AI startups at unprecedented rates. Companies with minimal revenue but AI in their pitch deck are raising hundreds of millions.
Talent Wars: AI researchers and engineers are commanding salaries that would make investment bankers jealous. Companies are acquiring AI talent at any cost, often for projects that may not even have clear business cases yet.
But here's the thing with AI: we know for 100% certainty that it's here to stay. I work in software development, and the AI tools for software developers are never going away. They make us way more productive and save us enormous amounts of time. Tools like Codex, Claude, Cline, and Cursor (not sure why they all start with C’s) have fundamentally changed how code gets written, and there is no going back. Likewise, ChatGPT, or some version of it, will always be used by students for summaries, learning skills, and countless other applications. Entire industries are being rebuilt with AI at their core.
So are we in an AI bubble? Almost certainly yes, by traditional metrics. But we are also witnessing the birth of the most transformative technology in human history.
Interesting take Scott! Only time will tell if there will be an ai bubble crash like there was with the “.com bubble” but one similarity I didn’t see you mention was the companies that pivoted towards ai/ .com not taking the actual technology seriously but just hopping on the trend and slapping the label on at the end of their business name.
During the .com bubble there were even multiple companies that changed their names to end in “.com” just so that their market value would go up, only to never actually create a website. I feel like a lot of these new “ai” companies have bots that are a decade old and are not artificially intelligent at all, just old fashioned bots programmed to do 1 thing.
Anyways I doubt ai is going anywhere in the long run either.