Fast Company ran a contrarian take about AI from entrepreneur/thought leader Faisal Hoque, who argues there’s three AI bubbles.
The first is a classic speculative bubble, with asset prices soaring above their fundamental values (like the 17th century’s Dutch “tulip mania”). “The chances of this not being a bubble are between slim and none…”
Second, AI is also arguably in what we might call an infrastructure bubble, with huge amounts being invested in infrastructure without any certainty that it will be used at full capacity in the future. This happened multiple times in the later 1800s, as railroad investors built thousands of miles of unneeded track to serve future demand that never materialized. More recently, it happened in the late ’90s with the rollout of huge amount of fiber optic cable in anticipation of internet traffic demand that didn’t turn up until decades later. Companies are pouring billions into GPUs, power systems, and cooling infrastructure, betting that demand will eventually justify the capacity. McKinsey analysts talk of a $7 trillion “race to scale data centers” for AI, and just eight projects in 2025 already represent commitments of over $1 trillion in AI infrastructure investment. Will this be like the railroad booms and busts of the late 1800s? It is impossible to say with any kind of certainty, but it is not unreasonable to think so.
Third, AI is certainly in a hype bubble, which is where the promise claimed for a new technology exceeds reality, and the discussion around that technology becomes increasingly detached from likely future outcomes. Remember the hype around NFTs? That was a classic hype bubble. And AI has been in a similar moment for a while. All kinds of media — social, print, and web — are filled with AI-related content, while AI boosterism has been the mood music of the corporate world for the last few years. Meanwhile, a recent MIT study reported that 95% of AI pilot projects fail to generate any returns at all.
But the article ultimately argues there’s lessons in the 1990s dotcom boom: that “a thing can be hyped beyond its actual capabilities while still being important… When valuations correct — and they will — the same pattern will emerge: companies that focus on solving real problems with available technology will extract value before, during, and after the crash.” The winners will be companies with systematic approaches to extracting value — adopting mixed portfolios with different time horizons and risk levels, while recognizing organizational friction points for a purposeful (and holistic) integration.
“The louder the bubble talk, the more space opens for those willing to take a methodical approach to building value.”
Thanks to Slashdot reader Tony Isaac for sharing the article.
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