AI isn't in one bubble, but three, expert claims
What's the story
Faisal Hoque, a well-known entrepreneur, author, and thought leader, has argued that the artificial intelligence (AI) sector is not just in one bubble, but three. The first is a classic speculative bubble where asset prices have shot up beyond their fundamental values. Hoque likened this to the 17th century's Dutch "tulip mania," saying "the chances of this not being a bubble are between slim and none."
Infrastructure concerns
Infrastructure bubble
The second bubble, according to Hoque, is what he calls an "infrastructure bubble." This refers to massive investments in infrastructure with no guarantee of future use. He compared this trend to the late 1800s when railroad investors built thousands of miles of unnecessary track for a demand that never materialized. Today, companies are investing billions into GPUs, data centers, power systems, and cooling infrastructure hoping that demand will eventually catch up.
Hype factor
Hype bubble
The third bubble is what Hoque calls a "hype bubble," where the expectations from a new technology are exaggerated. He said the conversation around this tech often strays far from its realistic future prospects. This is evident in the media's obsession with AI and corporate enthusiasm for it over the past few years. An MIT study recently found that 95% of AI pilot projects fail to yield any returns at all.
Historical perspective
Lessons from dotcom boom
Despite these bubbles, Hoque argues that there are lessons to be learned from the 1990s dotcom boom. He said "a thing can be hyped beyond its actual capabilities while still being important." When valuations correct—and they will—companies that focus on solving real problems with available technology will extract value before, during, and after the crash. The winners in this scenario would be companies with systematic approaches to extracting value by adopting mixed portfolios with different time horizons and risk levels.