Nvidia, a major player in the AI space, has seen its revenues soar 126% to about $61 billion last financial year, driving its market value from below $400 billion to some $2.2 trillion. However, Gordon warns that even if AI is the next big thing, the valuations of AI companies may still be overblown, and these companies could still crash, causing significant losses for investors.
Key takeaways:
- The AI boom is similar to the dot-com bubble of the late 1990s and early 2000s, but potentially more dangerous due to the larger number of investors involved, according to Professor Erik Gordon.
- While the internet's pioneers were mostly small startups, the leaders of the AI space include established, profitable titans like Microsoft and Alphabet, which can withstand significant losses.
- However, if AI losses drive their stock prices down, many investors, including pension funds and retirement portfolios, could suffer due to the large market share of these Big Tech companies.
- Gordon has previously described the current situation as an 'order-of-magnitude overvaluation bubble', rather than a 'fake-companies bubble'.