Dec 30, 2025
3 min read
A bubble, in the context of the financial market, is a word with a special meaning.This means that the price of certain goods exceeds their intrinsic value (a...
The grade can be very good, there can be chaos, but although there is excitement, there is no fever or conflict.
Bubble, in the context of financial markets, is a word with a specific meaning.This means that the price of certain assets exceeds their intrinsic value (a rational estimate of future returns) and by definition implies a certain fever, euphoria or irrationality.
Despite all the talk of bubbles, such irrationality remains difficult to diagnose between the current wave of market enthusiasm does not mean that all capital allocated to the problem of it as a boom (which could become a crisis) rather than a bubble.
Those who fear a bubble have many signs of a big move to point to: the spectacular performance of AI shares, which in the case of Nvidia led it to become the first company with a value of more than 5 trillion dollars (4.2 trillion euros);the huge proportion of US output going to technology investment;Artificial intelligence startups immediately valued at billions of dollars;increasing the use of debt to finance data centers;and dubious contracts and circulars like OpenAI's partnership with Nvidia and AMD, where technology vendors invest in AI companies that then use the money to buy the vendor's products.
However, enthusiasm does not always mean irrationality.It is important to distinguish between two situations that resemble bubbles but are not.
One is excessive optimism.Whenever a radical new technology such as artificial intelligence emerges, there is great uncertainty about its value.Will it work?What are applications?Will it continue to grow exponentially?
Investors must make judgments with very limited information, and initial assessments may be wrong once the availability of a technology becomes apparent.This will manifest itself not as a bubble bursting, but as an investment boom that will turn into a crisis.Overestimation of intrinsic value is not an escape from it.
Three years after the launch of ChatGPT heralded the arrival of synthetic AI, its utility is still unclear.Many companies have discovered that chatbots won't make it very far, but in 2025, AI has found important applications, such as computer programming, and the technology is still evolving rapidly.There are reasons to be optimistic about its value.
A second, closely related situation is another type of error, where investors correctly assess the value of a new technology, but confuse the winners.In retrospect, one of the most important aspects of the dot-com boom in the 1990s is how rational it was.
The marketers of the time were right about the great value of the Internet.Yes, he made an early bet, buying the top companies of the time (Yahoo and Lycos, Amazon and AOL), but Google was managed in the garage and Mark Zuckerberg is still learning.The winners of the AI generation may not be established yet, but, again, error does not mean lack of thought.
However, the main reason it's called a boom, not a bubble, is the driving force behind it: the strategic decision for a small group of established technology companies to invest hundreds of millions in AI.
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The ChatGPT interface represents an immediate and obvious threat to Internet search (Alphabet: $3.8 trillion market cap).Algorithms, filtering, and generative AI influence content creation and social media (goal: $1.7 trillion).With a little imagination around AI agents and voice interfaces—and the executives who run these companies have a well-developed idea of the competition—the technology could revolutionize the smartphone industry (Apple: $4.05 billion) and e-commerce (Amazon: $2.5 billion) before Microsoft and the rest of the industry catch up.
Protecting these extremely valuable businesses is easily worth investing a fortune as insurance, even if AI doesn't end up creating much new value."If we end up spending a few hundred billion dollars, I think it's going to be very unfortunate, obviously, but ... I think the risk is higher on the other side," Zuckerberg said in September.You can be wrong.He doesn't seem mad.
OpenAI, the biggest startup in the sector, proves this argument rather than refuting it.The most plausible reason for its value in the hundreds of billions is the ability to monetize its 800 million plus weekly users at the expense of existing tech giants.On the other hand, if you spend hundreds of billions of dollars a year on AI, that spending supports large investments in data centers and the purchase of large quantities of semiconductors from Nvidia, regardless of the ultimate success of the technology.
Meta and Alphabet's valuations at 25-30x earnings look bullish, but not bullish.I argue that this does not mean that AI will succeed, that market expectations are correct, and that growth will not be a crisis.Given the uncertainty, it would be surprising if the market's current belief is more right than wrong, but investors should analyze the real potential of this technology rather than viewing it as a bubble.
Financial Times Limited [2025]. All rights reserved. FT and Financial Times are registered trademarks of Financial Times Limited. Redistribution, reproduction or modification prohibited. EXPANSI'N is solely responsible for this translation and Financial Times Limited is not responsible for its accuracy.
