The AI investment frenzy just got its most damning assessment yet. Using a historical framework that's accurately predicted every major tech bubble, researchers are sounding maximum alarm bells about artificial intelligence - giving it a perfect 8 out of 8 on their bubble scale. With Nvidia now worth $5 trillion and Big Tech pledging $400 billion more, the question isn't whether we're in a bubble anymore.
Nvidia just became the world's first $5 trillion company - that's 2.5 times Canada's entire economy. Meanwhile, 95% of businesses deploying AI say they're seeing zero returns. If this doesn't scream bubble, what does?
Brian Merchant, author of "Blood in the Machine" and WIRED contributor, decided to cut through the vibes-based bubble chatter with actual science. He turned to a 2019 academic framework by scholars Brent Goldfarb and David Kirsch that's successfully identified every major tech bubble in history - from the dot-com crash to the aviation boom of the 1920s.
The verdict? AI scores a perfect 8 out of 8 on their bubble scale. "We've got the maximum level of bubble alert here," Merchant tells WIRED's Uncanny Valley podcast.
The framework looks at four key factors, and AI checks every box with flying colors. First is uncertainty about business models - just like electricity in the 1800s, everyone knows AI is powerful, but nobody's figured out how to reliably make money from it. When OpenAI CEO Sam Altman was asked about their business plan years ago, he literally said they'd "build AGI and ask it" how to make money. Talk about uncertainty.
Second comes "pure play" companies - businesses that live or die entirely on the bubble technology. Nvidia has become the poster child here, transforming from a gaming chip company into an AI infrastructure juggernaut. "It's the classic case of selling shovels during the gold rush," Merchant explains. If AI tanks, so does Nvidia - and that company now represents 8% of the entire stock market.
The third factor is novice investor access, and boy do we have that. Anyone with a Robinhood app can pour money into Nvidia. But here's the kicker - according to Goldfarb, AI is so loaded with uncertainty that even sophisticated investors become novices. "Nobody knows what this future is going to be," Merchant notes.
The final ingredient is coordinated belief among investors about the technology's potential. AI's narrative is literally "it will do everything" - cure cancer, fight climate change, automate all jobs, babysit kids. "It's the story to end all stories," Merchant says. There's something for every investor to believe in.
