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How well is the stock market doing? That now depends, almost entirely, on artificial intelligence and the companies that make it.
Those companies, concentrated in Silicon Valley, are spending hundreds of billions of dollars. Investors think this tech is the future, so they’re snapping up shares. By one estimate, 80 percent of U.S. stock gains this year came from A.I. companies.
Does it feel like a bubble? Big names like Jeff Bezos (Amazon), Sam Altman (OpenAI), Jamie Dimon (JPMorgan) and David Solomon (Goldman Sachs) worry we’re on the cusp of a correction. They warn that valuations are getting too high and that eventually, reality may bite. And if those companies plunge, they’ll take the economy with them.
But nobody is acting like we’re in trouble. The S&P 500 has notched more than 30 record highs this year. The wisdom of the bet rides on a basic question: Is A.I. a boom or a bubble? Here are the arguments.
A boom
If A.I. tech can keep getting better, then A.I. companies can keep getting more valuable.
Many believe it. These companies assume that building out A.I. infrastructure — more chips, more data, more power — improves the technology coming out the other end.
This is called the “scaling hypothesis.” It helps explain why Nvidia and AMD recently announced $100 billion deals to install their chips in OpenAI’s data centers; why Amazon is spending more than $100 billion on A.I. data centers this year; why Meta will spend more than $600 billion over the next three years; and so on.
