Azeem Azhar's Exponential View Are we in an AI bubble? (these are the 5 warning signs)
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Sep 25, 2025 Is AI a bubble? The discussion dives into a five-gauge framework to explore this pressing question. Historical comparisons with past manias shed light on investment behaviors and revenue growth. Key indicators like investment intensity and monetization levels reveal insights into AI's economic impact. While most gauges show a healthy boom, some amber signals suggest caution. Ultimately, even if a financial bubble bursts, the underlying potential of AI technology is here to stay.
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Historic Bubbles Framing AI Risk
- Azeem recalls historical bubbles like tulips and railways to show how narratives can drive markets beyond fundamentals.
- He warns that rhetoric can become reality and cause prices to collapse when fundamentals catch up.
Five Gauges To Diagnose Bubble Risk
- Azeem introduces a five-gauge framework to diagnose bubble risk like a pilot uses instruments.
- The framework compares investment, monetization, revenue, valuation, and capital quality to assess sustainability.
Capex Is Near Historic Stress Levels
- Investment intensity measures capex relative to GDP and flags sectors that bend the whole economy.
- AI data center build-out in 2025 approaches ~1% of US GDP, putting this gauge at the amber boundary.