Matt Wetherington

🔥 HOT TAKE: Is the current AI wave another tech bubble? According to @Floridi, YES, and his recent paper "Why the AI Hype is Another Tech Bubble" is a MUST-READ. Below, he explains more about tech bubbles: "A quick comparison between the Dot-Com Bubble and the Cryptocurrency Bubble shows that the former was larger in scale, longer in duration, and primarily centred in the U.S., while the latter rose and fell more rapidly and was a more global phenomenon. The Dot-Com Bubble saw significant institutional investor participation, while the Cryptocurrency Bubble was initially driven more by retail investors. Unlike purely speculative assets, many dot-coms had actual products, services, and intellectual property, even if overvalued. However, the bubbles fed each other, and shared several core characteristics, to such an extent that there are strong family resemblances, to use Wittgenstein’s famous metaphor: 1️⃣ A disruptive technology at the core. A bubble centres around a technology with the potential to revolutionise multiple industries, other technology (synergetic effect), and the tendency to cause tunnel vision. 2️⃣ Speculation outpacing reality. In a bubble, market excitement and investment outpace the actual development and implementation of the technology, its long-term usefulness, and sustainable profitability. 3️⃣ New valuation paradigms. Traditional financial metrics tend to be discarded in favour of new, unorthodox and often flawed measures of value. 4️⃣ Retail investor participation. Since the Cryptocurrency Bubble, individual investors' significant involvement, often motivated by FOMO, has become a significant feature. 5️⃣ Regulatory gap and lag. Regulatory frameworks are absent in a bubble and/or struggle to keep pace with technological and market developments." - "Following the previous analysis, there is a compelling argument to be made that the current AI Hype Cycle shares significant similarities with previous tech bubbles, exhibiting the typical characteristics of a tech bubble (...). The rapid advancements in AI, particularly in machine learning, deep learning, and LLMs (or, to be more precise, foundation models), have led to a surge of excitement, investment, and media attention, mutually reinforcing each other and reminiscent of previous tech bubbles, especially the Dot-Com Bubble (...). The release of ChatGPT in November 2022 accelerated this trend, creating a perfect storm (still ongoing at the time of writing, though it seems to be abating) of inflated expectations and speculative investment. This phenomenon bears striking resemblances to the tech bubbles of the past, suggesting that we may indeed be witnessing the formation of an AI bubble." ➡️ Read the full paper below. 🏛️ STAY UP TO DATE. Join 37,400+ people who subscribe to my weekly newsletter on AI policy, compliance & regulation, including outstanding research papers (link below).