It must surely burst at some point, but it’s interesting reading this New Statesman piece from early August suggesting that the sharp dip in July could turn out to be a parallel to the dot com crash:
he dot-com crash began on a Friday – 10 March 2000 – but it wasn’t named as such until some time later. A week later, the New York Times declared “technology-heavy Nasdaq bounces back” as part of a new “surge” in stock prices. Internet companies were still attracting huge valuations without making any profit. Almost everyone believed the boom was still under way, but it had already become a crash: by October 2002, tech stocks had declined by almost 80 per cent from their peak.
It may be that 24 July 2024 comes to be remembered in similar terms. The Nasdaq-100 – an index of 100 publicly traded companies which includes Apple, Intel, Nvidia, Microsoft, Alphabet and other Big Tech names – lost a trillion dollars in market value as investors looked at a new round of company reports and asked when exactly the world-changing AI revolution was going to show up as earnings. On 2 August, the investors moving their money out of the tech-heavy American stock market was “becoming a stampede”, Bloomberg News reported, as signs of a slowing US economy sent money flowing away from riskier investments.
This was the end of a period of spectacular growth that has in recent years been largely based on the AI narrative. From November 2022 to July 2024 the market value of Nvidia, which makes chips used for running large language models such as ChatGPT, increased by nearly $2.5trn – hundreds of billions more than the value of the entire FTSE 100 index of Britain’s largest companies. By March of this year, tech stocks were priced as confidently (relative to their sales) as they had been at the height of the dot-com boom.
https://www.newstatesman.com/science-tech/2024/08/when-the-ai-bubble-bursts
I’m completely out of my comfort zone here, but this appears to me like a much more individualised trajectory for the big tech firms whose fates are most tied up in GAI:
In terms of the integration of GAI into organisation, the bubble bursting would probably be a good thing. It could be useful to ground ourselves in the realisation this is just software: it’s extremely unusual software, with a remarkably range of capabilities, but integrating it into organisational processes isn’t something that should be done in a rush or out of a fear of being left behind.
If I understand the argument Varoufakis has made about technofeudalism accurately, we shouldn’t assume that disenchantment with the technology will necessarily lead to the bubble bursting. This implies that the real economy and stock markets are still cleaved together, whereas that’s exactly what has changed. If there are any economists reading this who have ideas about what I should read to better understand the AI bubble, I’m totally open to suggestions.
Mark Carrigan 