_{“A Satire of Tulip Mania” by Jan Brueghel the Younger (c. 1640) humorously depicts speculators as brainless monkeys dressed in contemporary upper-class attire. In a commentary on the economic folly, one monkey urinates on the once-valuable tulips, others are shown in debtor’s court, and one is even carried to the grave.}

As we progress through 2024, it’s becoming evident that a new economic bubble driven by the hype surrounding Artificial Intelligence (AI) is building up. Much like the dot-com boom of the late 1990s, AI is captivating investors and reshaping industries. AI promises to revolutionize sectors from healthcare to finance. Startups and tech giants are racing to integrate AI, with venture capitalists pouring billions into the sector. Despite the over-excitement, we’re not bursting yet—the bubble is slowly accumulating as outside of giants like Microsoft, Meta, and Nvidia, public market investments in AI remain difficult.

While companies like Amazon thrived through the dot-com bubble, spotting an Amazon ex-ante was difficult. The same challenge exists today with AI. Many AI companies have reached billions in valuation without substantial revenue or clear paths to profitability. However, this bubble is mostly driven not by AI companies themselves but by classic companies’ fears and thick wallets. As in the dot-com era, the bubble growth is driven by over-excitement rather than a lack of innovation. A significant sign of this bubble is the FOMO among CEOs of traditional companies.

Let me share an example. A large company’s CEO, caught up in the AI hype, orders his executives to acquire some AI because “AI is important.” The executives, knowing very little about AI, scramble to find a target. They end up buying a company whose products they don’t understand and likely overpay for it. This rush mirrors past bubbles, where eagerness to capitalize on trends led to overvaluation.

AI holds immense promise, having already changed the world and poised to do even more. However, unchecked enthusiasm can lead to bubbles with significant consequences. By approaching the AI boom critically and strategically, investors and businesses can navigate this landscape, harnessing AI’s potential while avoiding the pitfalls of an overheated market. But everyone is talking about AI, and everyone has an opinion—from little kids to CEOs and even CTOs. However, the “T” in CTO is not a guarantee that they know what a transformer and attention are, or understand how views on the convergence of models and their sizes have evolved over the past few years and why this is important.

And to the CEOs in FOMO mode: Remember, AI might be artificial, but wasting money on it is very real!