Planet Money So are we in an AI bubble? Here are clues to look for.
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Jan 10, 2026 Is the AI boom a bubble? Economists delve into the intriguing clues for spotting bubbles, highlighting high valuations and volatility. They explore the historical context of past bubbles and their potential economic fallout, while discussing the delicate balance policymakers face in managing them. The hosts also ponder the unexpected benefits bubbles can bring, like infrastructure development from the dot-com era. Will AI lead to a crash or contribute to innovation? Tune in for a mix of analysis and lighthearted insights!
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What Defines A Bubble
- A bubble is when prices far exceed the value delivered and people pay for narratives, not fundamentals.
- Bubbles form around new, uncertain technologies because many competing stories can survive in the market.
Four Clues That Hint At Bubbles
- Harvard researchers identified four bubble clues: high valuations, volatility, issuance, and acceleration.
- Acceleration — prices ramping up faster and faster — proved one of the strongest predictors of crashes.
AI Rally Shows Mixed Bubble Signals
- The current AI rally shows some signs of bubbling: elevated valuations and increased volatility.
- But issuance and clear acceleration are weak or absent, so the evidence is mixed for calling it a full bubble.