Tech bubble soon to pop?

FOMO - fear of missing out - is helping drive some US stocks towards bubble territory. The Nasdaq is now up 30% year-to-date. The charge is being led by those stocks that have been most vociferous in their involvement in the AI (artificial intelligence) world. Some stocks are registering astonishing rises - NVIDIA for example is up more than 258% year to date and now has a market capitalization of $1 trillion. Is this bubble close to popping or has it further to go? New technologies always create their own buzz. Goldman Sachs suggests this time it could be different, that AI might drive productivity gains that push up global gross domestic product by 7% over ten years. The data analytics firm GlobalData estimates the global AI market will be worth $383 billion in 2030, a 21% compound annual growth rate from 2022.

There are several types of AI - ordinary AI is reactive, its output depends entirely on its input. Generative AI, which can formulate and deliver new content independent of the input, is what's exciting and/or worrying people. What distinguishes this tech stock boom from the dotcom bubble of the late 1990s is that AI can make current processes more efficient. While numerous dotcom companies failed to deliver profits and merely rode a fashionable trend, AI - if it is properly harnessed - might actually cut costs and spur creativity in many different fields. But - as ever - it's a case of caveat emptor because as with any new industry there will be some hype and failures along the way.