What is the AI ​​bubble? The concept and the most important indicators of market inflation

There are increasing talks in economic and investment circles about an ‘artificial intelligence bubble’, in light of astronomical valuations, unprecedented financing races, and the construction of major infrastructure whose profitability has not yet been tested. Some people believe that what is happening is a natural extension of a technological surge, but others warn that we live in a scenario, similar to what happened to the Internet bubble in 1999. When do we know that the market is in a ‘bubble’? Are there any indicators that support these fears today? What is the definition of a market bubble? How does it arise? A bubble is an economic cycle that begins with a sharp and rapid rise in asset prices, to levels that do not reflect their economic fundamentals. This rally is often powered by excessive investment enthusiast driven by fear of missing out (FOMO), and then followed by a sudden collapse known as ‘The Bubble’ pop. ‘US economist Hyman Minsky has set up five phases that go through a bubble: Displacement: The rise of a new event like a revolutionary technology. Boom: Accessing large investments. Euphoria: Increased enthusiasm and speculation. Profit room: The exit of professional investors. Panic: A collapse in prices and a mass flight from the market. Why is it difficult to detect a bubble while forming? Bubbles often look like impressive successes at the beginning, as prices deviate from realistic values ​​for different reasons, and the collapse may only appear later. Price alone is not enough as an indicator; On the contrary, a bubble becomes visible when expectations do not realize, or when businesses cannot justify high valuations with real profits. Are there any signs of a “bubble” right now? Yes, and there is more than one proof: Market behavior: The market in January saw the market that the Chinese company ‘Deepseek’ announced a competitive model at a low cost, which led to a major sales of a trillion dollar to technological stocks. Nvidia shares – one of the most prominent symbols of artificial intelligence – dropped by 17% in one day. Read more: What is China’s ‘DeepSeek’ and why are AI giants worried? The speed of recovery despite warnings: Despite this shock, Nvidia returned to achieving its highest market levels, with a value of over $ 4 billion by September, which became the most valuable company in the world. Agreements with the Internet bubble: As in 1999, we now see an influx of investment in startups, many of which promote unconventional statistics (such as the number of users or involvement rather than profits), in addition to major infrastructure projects with no clarity on the expected return. Are the scenes of the internet bubble repeated? According to analysts, the agreement is striking. At the end of the 1990s, investors poured large amounts of money into companies that relied on ‘yard visits’ rather than profits. Telecommunications companies then spent billions of rands on fiber optic networks before ensuring real demand. When the collapse took place in 2001, companies disappeared completely or sold to stronger businesses at lower prices. According to Bloomberg, today we see similar indicators in artificial intelligence. Will this lead to a complete collapse? Or partial correction? Experts are divided. “I think there are many similarities to the Dot-Com bubble,” says Brett Taylor, chairman of Openai and director of Sierra. “Yes, there are companies that will collapse, but we will also see the birth of huge businesses, just as with Amazon and Google.” He adds: “It is true that artificial intelligence will achieve great economic transformation … but at the same time it will form a bubble, and many will lose.” “They money.” Is there anything that distinguishes the AI ​​bubble from others? Yes. Artificial intelligence is progressing at an unprecedented velocity and is supported by major technology companies with enormous financial solvency, such as Microsoft and Google, giving it sustainable momentum. But there are still risks. The risks are represented by relying on great capital expenditure to data centers, chips and energy, in addition to the recurring financing for projects that have not yet been achieved. Prove its commercial feasibility. The absence of clear profit models in many initial companies. Conclusion: Are we in a bubble? Maybe yes, but it’s not like all bubbles. Artificial intelligence is not a passing “vulture”, but a real technological revolution. However, excessive enthusiasm and valuations that are not supported by realistic earnings warn that the market may at some point undergo a painful correction, according to Bloomberg. Investors who run those who run after promises without careful analysis can pay the price, while those who bet on long -term technology will find themselves in a position similar to those who invested in Amazon in 2001. Indications of market inflation are a starting venture valued at more than a billion dollars despite the absence of a final product or a clear profit model. CB Insights -data indicates that in 2024 only artificial intelligence enterprises acquired … Financing is more than one billion dollars, raising questions about the sustainability of this flow. Enthusiasm is not supported by results: Analysts confirm that enthusiasm about artificial intelligence is not new, but the difference today is that expectations have exceeded reality. Many investments come before the real economic impact of the technology is clear. Financial entanglements and closed offers: Bloomberg reports indicate that some major businesses such as Microsoft and Open AI exchanges investments and services in a ‘closed loop’, making it difficult to assess the real demand independently. Confidence on large capital without a certain return: Management of artificial intelligence models requires large investments in data centers and advanced discs. Bloomberg Economics analysts believe that a shaky market can leave many businesses with large operating costs and a limited customer base. Signals of the general market: shares of companies such as Nvidia and poor have risen to historical levels, but any slowdown in question whether a change in interest policy can lead to a sharp correction in valuations. Read more: SoftBank negotiates a $ 5 billion loan guaranteed by poor stocks in the Bubble Circle Openai, above the list with a valuation of more than $ 500 to an internal share sales round, according to Reuters. Despite the widespread use of GPT chat, the company still relies on Microsoft Support, which exceeded more than $ 13 billion, most of which are in the form of Azure Cloud Services. Anthropic also rose to a $ 183 billion valuation to a massive $ 13 billion financing from Amazon and Google, although the products have not yet proved a significant commercial viability. Analysts believe that this difference between valuations and fundamentals keeps the internet bubble in mind at the beginning of the millennium. Other companies suspected of bloating their valuation in the AI ​​race has announced that the top investors’ warnings Xai $ 24 billion (estimated) different investors (including Elon Musk), the company is still a new business, and the initial products have not yet shown superiority over competitors. Inflation is powered by Elon Musk’s name. Bend AI over $ 4 billion Microsoft and Nvidia in billions of rands on funding, even if their virtual assistant (PI) did not receive widespread acceptance. It is said that Microsoft “then” acquired “the infrastructure. Cohere has more than $ 3 billion in sales force Nvidia is a business specializing in artificial intelligence solutions for businesses, but it has not yet reached the public or media penetration, despite its high evaluation. Runway not strictly advertised (multi-billion) Google Ventures, focused on video-ai, buzzing, but revenue remains limited compared to valuation. Capital expenditure: An on-stop race indicates that Bloomberg indicates that capital spending (Capeex) will double from the largest technology companies Microsoft, Amazon, Alphabet, Meta-of-$ 200 billion in 2024 to more than $ 400 billion in 2026. These expenses reflect a long-term bet on artificial intelligence, but it is also raised about whether it is driven by excessive optimism. Acquisition offers the purpose of hiring: When competencies change in the right asset, one of the striking trends at the current stage, known as acquisition – that is, the acquisition of starting companies for their engineering teams is not their products. In May 2025, Bloomberg revealed that “Openai” acquired the company “Windsurf” (formerly known as Codeium) for about $ 3 billion, in an agreement aimed primarily to attract the leading engineering team. Large companies such as Meta and Google take on the same approach, and emphasize the importance of the human element in the AI ​​breed – but it also raises the question: Are we really in a bubble? Amazon chairman Jeff Bezos said that spending on artificial intelligence is such as an ‘industrial bubble’ that can lead to investment losses, but eventually it will benefit … community. He explained: ‘If people get very excited I see, as happens today with artificial intelligence, every experiment and every business is funded, whether the ideas are good or bad. “He pointed out that some businesses receive billions of dollars before starting a product. However, during his participation in the ‘Italian Technology Week’, Bezos emphasized that artificial intelligence would bring about a transformation in all sectors and improved the productivity of ‘all businesses in the world’. venture capital investments in the early stages of this sector.