Two legends of the game, Jeremy Grantham of GMO and Edward Chancellor, renowned financial historian, joined forces to release this paper, which examines AI through the lens of historic bubbles. Their conclusion makes for tough but necessary reading.
Link: Valuing AI: Extreme Bubble. Golden Era, or both?
Synopsys: Valuing AI: Extreme Bubble, Golden Era or Both? examines the dual nature of the current artificial intelligence boom as both a paradigm-shifting technological era and a classic speculative financial bubble. Authors Jeremy Grantham and Edward Chancellor argue that while AI is a world-changing innovation comparable to the steam engine, it has triggered a period of extreme over-valuation and reckless capital expenditure that mirrors historical manias. The article provides a detailed ten-point framework for identifying manias, highlighting how modern symptoms like unbounded optimism, “bezzle” or fraudulent accounting, and a massive overcommitment of capital are now manifesting in the AI ecosystem. Ultimately, the source serves as a cautionary warning that even the most revolutionary technologies inevitably face a severe market correction before reaching a state of productive maturity.
