An AI bubble mustn’t distract us from the AI revolution

Every major technological boom attracts sceptics. Today, that chorus is growing louder around artificial intelligence (AI).

- NILESH JASANI

Critics are right about one thing: there is excess. Accounting tricks, circular investments and heroic revenue projections all deserve scrutiny. But the mistake is to assume that financial excess equals technological emptiness. To confuse the investor story with the innovation story is to misunderstand how value is now created and where it truly resides.

Noise versus the signal: The financial system around AI contains a rising number of excesses that would have been unacceptable to regulators or markets in bygone eras. Capital moves in loops: a large company invests billions in a partner, at times with warrants, and the partner spends those billions purchasing the wares of the investor. The same transaction gets recorded as an investment in a company with revenue growth for one, and as revenue for the other. Business carries on, even if sticklers pen doomsday scenarios. It can go on for years. Yes, this is froth and will likely cause a deep cyclical reversal. But dismissing AI because of financial froth is like shrugging off the internet in 1999 because an electronics chain went bankrupt. The signal is not in the hype. It lies in the quiet, irreversible shift beneath it.