Inside Markets — AI Bubble Watch

Reports about a potential AI bubble aren’t surprising, given that high private company valuations and performance concentration in public markets were also present in late ’99-early 2000. Of course, those conditions have been present for the last ~2 years and that’s where the readthroughs to the ’99/’00 bubble end.  That bubble included high IPO activity, high levels of bullish sentiment and very low profit/capital return profiles, while the current environment has low IPO activity, healthy investor skepticism and stronger profit/capital returns. In our view, the risk of a ’99/’00 -like bubble in the Ai theme is not imminent. However, a near-term pullback in equities could start from the unwinding of spicier/unprofitable segments (quantum computing) of the market following a disappointing macro print.