Bubble, in the context of financial markets, is a word with a specific meaning. It signifies that the price of certain assets exceeds their intrinsic value — some rational estimate of future returns — and by definition, therefore, it implies some mania, euphoria or irrationality.
Despite widespread talk of bubbles, such irrationality is still hard to diagnose in the current wave of market enthusiasm for artificial intelligence. That does not mean all the capital going into the sector must earn good returns — far from it. But for now at least, AI is best thought of as a boom — one that may turn into a bust — rather than as a bubble.
Those who fear a bubble have plenty of exuberance to point towards. There is the spectacular performance of AI stocks, with Nvidia briefly becoming the first company worth more than $5tn; the huge share of US output going into tech investment; the AI start-ups instantly valued in the billions of dollars; the increasing use of debt to fund data centres; and the dubious, circular deals such as OpenAI’s partnerships with Nvidia and AMD, whereby tech suppliers invest in AI companies that immediately use the money to buy the supplier’s product.