Booms and busts are a recurring feature of modern economics, but when an asset’s value becomes overinflated, a boom quickly becomes a bubble.
The two most recent major bubble episodes were the dot-com bubble in the United States (1996-2000) and the housing bubbles that emerged around 2006 in different countries. Both ended in recession – the former relatively mild, and the latter catastrophically bad. Recent, dizzying increases in the stock prices of AI-related companies have now got many investors asking “are we witnessing another asset price bubble?”
It is important to put the current AI boom in context. The stock price of Nvidia – which manufactures many of the computer chips that power the AI industry – has…
