The two most recent episodes of this type were the dot-com bubble in the United States (1996–2000) and the property bubbles that emerged around 2006 in several countries. Both ended in recession: the first was relatively mild, and the second was catastrophically severe. The recent dizzying increases in the share prices of AI-related companies have led many investors to ask, “Are we witnessing another asset price bubble?” 

It is important to put the current AI boom into context. The share price of Nvidia, which manufactures many of the computer chips that power the AI industry, has risen thirteen-fold since the beginning of 2023. Shares in other AI-related companies, such as Microsoft and Alphabet, Google’s parent company, have risen 2.1-fold and 3.2-fold, respectively. By comparison, the S&P 500 index, which tracks the performance of the largest companies in the United States, has only risen 1.8-fold over the same period. 

At the very least, part of the rise in the value of AI-related shares is a bubble, and a bubble cannot remain inflated forever. 

This article was originally published in The Conversation.