Wall Street is debating whether artificial intelligence is causing a bubble. Longtime investors who remember the Y2K bubble might think history is repeating itself. In 1999, corporations rushed to invest in fixing the Y2K bug.
The mad inflow of money into tech firms lifted companies that did not make money. This time, AI semiconductor and software firms are profitable. Exceptions exist. Bigbear.AI (BBAI) and Soundhound.AI (SOUN) lost 14 cents in EPS and 7 cents a share, respectively.
Nvidia (NVDA) is profitable. In addition, it posted guidance that more than exceeded the most optimistic analyst. Microsoft (MSFT), Salesforce (CRM), and Oracle (ORCL) are among the firms that benefit from accelerated AI spending the most.
Investors who missed out on the AI boom that is over a year old will call the AI rally a bubble. Adventurous investors who doubted Meta Platforms (META), Amazon (AMZN), AirBnB (ABNB), Netflix (NFLX), Alphabet (GOOG), and Uber enjoyed phenomenal returns in the last decade.
Your Takeaway
Watch the AI bubble weekly. Other sectors that rose on hype only to fall include electric vehicle stocks, Covid vaccine stocks, and clean energy stocks. Should companies run out of the money they saved from cutting staff, their spending on AI hardware will dry up.
Until that happens, the AI bubble will keep expanding.
