Stock market bears are on the prowl again growling about the dangers of a tech bubble. Ursine analysts at the IMF, the Bank of England, Goldman Sachs, JPMorgan Chase and Citi are all warning that valuations are surging to levels not seen since the dotcom crash 25 years ago. The implicit message is that AI is overhyped.

The reaction of bullish west coast tech bros has been to shrug and carry on investing, drawing a distinction between a “good” industrial investment bubble and a “bad” speculative financial bubble. But the strong likelihood is that we are experiencing both. 

One of the most articulate advocates of the good bubble theory is Google’s former boss Eric Schmidt. “Bubbles are great. May the bubbles continue,” he told me at the Sifted summit last week. Their historical function has been to redirect masses of capital into frontier technology and infrastructure, which is good for the world. But the latest technological transformation comes with a novel twist: AI will one day far exceed the cognitive capabilities of humans. “I think it’s underhyped, not overhyped. And I look forward to being proven correct in five or ten years.”