Is the artificial intelligence (AI) industry in a bubble? A common topic of conversation recently, investors may be curious if the AI industry is showing similar characteristics to previously known bubbles, such as the dot-com bubble or the 2008 housing bubble. In this blog, learn more about market bubbles, the current landscape of the AI industry, and if there potentially could be an AI bubble.

Is There an AI Bubble?

Understanding Market Bubbles

A bull market is an economic cycle characterized by a rapid escalation in asset prices, driven by energetic investor sentiment and positive market behavior. However, a bull market can turn into a market bubble when prices detach from the fundamental financial metrics and focus shifts away from intrinsic value. This inflationary period is typically followed by a sharp market contraction, or the bubble “bursting” where prices rapidly correct and realign back with fundamentals. Economist Hyman Minsky describes five stages of a bubble: displacement, boom, euphoria, profit-taking, and panic. Bubbles can be very difficult to identify in the moment, in that there are a lot of the same characteristics as a general bull market like positive investor sentiment and growing demand. Bubbles may not be able to be identified until after the burst and pricing correction has occurred.

Recent Market Bubbles

The two notable bubbles in recent times that many will remember include the dot-com bubble of the late 1990s and the 2008 housing bubble. The dot-com bubble was characterized by speculative investment in internet companies, often driven by metrics such as website traffic instead of more concrete metrics such as sales and revenue. After the bubble crashed in 2001, many companies had to shut their doors and others were acquired for pennies on the dollar. The 2008 housing bubble was characterized by loose mortgage lending principles (subprime), adjustable-rate mortgages (ARMs), strong demand, increasing home prices, and lax regulatory oversight. The burst came as interest rates rose, housing prices fell, and mortgage defaults rapidly increased, devaluing trillions of dollars of mortgage-backed securities.

Current State of AI

As interest in AI grows and more than half of recent venture capital funding is going to AI companies,[1] the AI industry is definitely showing characteristics of positive investor sentiment, growing demand, and increasing prices. Are investors bullish on AI, or will there be the telltale burst of a bubble at some point? Professionals are split on their opinions. The following are some quotes from individuals in the last few months August -December 2025 that are up close and personal to the AI industry and overall sentiment.

Sam Altman, co-founder and CEO of OpenAI, one of the prominent AI companies right now stated “Are we in a phase where investors as a whole are overexcited about AI? In my opinion, yes. Is AI the most important thing to happen in a very long time? My opinion is also yes.”

JPMorgan Chase executive Mary Callahan Erdoes has said calling the amount of capital being poured into AI is a “crazy concept”, stating that “we are on the precipice of a major, major revolution in a way that companies operate.”

Venture capitalist David Sacks said on his podcast All In, “I don’t think this is the beginning of a bust cycle, I think that we’re in a boom. We’re in an investment super-cycle.”

Google DeepMind’s CEO Demis Hassabis told Axios “Some parts of AI are probably in a bubble…[but] it’s not a binary.”

Additionally, OpenAI Chairman Bret Taylor acknowledged the AI is “probably in a bubble” at the AI+ Summit.

Jared Bernstein, the former United States Chairman of Council of Economic Advisers told CNBC that surging asset prices and extreme valuations indicate that an AI bubble is the “likely outcome.”

Former Intel CEO Pat Gelsinger said “Are we in an AI bubble? Of course!”

So, Are We in an AI Bubble?

Professionals are split on whether or not we are in an AI bubble. Some say yes, some say no, and others say not yet. It appears that the general sentiment is that there is bubble-like behavior within the AI space, but some believe the increasing investments into AI companies for supporting compute power is a necessary piece of the puzzle. AI has the potential to transform not just individual industries, but how people live, work, play, and interact as whole.

Final Thoughts

Taking a look at the AI industry as a whole, there are rising prices, positive investor sentiment, significant capital expenditure, and high company valuations. While these factors have been prevalent in previous market bubbles, professionals are split on whether or not the AI industry is currently in a bubble. It is difficult to say “we are in a bubble” until after the bubble has burst.

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[1] https://www.bloomberg.com/news/articles/2025-10-03/ai-is-dominating-2025-vc-investing-pulling-in-192-7-billion

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