Hey {{first_name | there}},

I saw a headline yesterday that said: "The AI Bubble Is Already Popping."

But then I saw another one that asked "If AI is a bubble, could rising yields pop it?"

So which is it? Is the bubble popping? Is it about to pop? Or is it not even a bubble at all?

Here’s the thing about this “AI bubble”: nobody freaking knows what the bubble is.

Some people think it's about stock prices. Others think it's about data centers. Some think it's about the technology itself. And others think it's about the gap between what AI promises and what it actually delivers.

Let me try to explain all this in a way that you would get.

Okay so imagine you’re in a school, and everyone suddenly decides that “Cat plush toys” are the most valuable thing in the world. People start trading them for hundreds of dollars. 

Your friend buys one for $500 because he thinks it'll be worth $5000 next year. The principal starts investing school funds in cat plush toys. Everyone keeps hyping them up.

Then one day, someone asks a simple question: "Wait, why are these plush toys worth so much?"

And nobody has a good answer.

That's a bubble. Now apply that to AI.

This is where most of the confusion comes from.

Because when two people say “AI bubble,” they’re probably not even talking about the same thing.

One person is looking at AI stocks and saying, “There’s no way these companies should be worth this much.”

Another is looking at the hundreds of billions being spent on chips, data centers and power and asking, “What if we’re building all this before the demand actually exists?”

And then there’s the bubble I find most interesting: Expectations.

We keep hearing that AI will transform our lives, replace huge amounts of work and make everyone far more productive.

But so far, the results are much more mixed. One study found that around 90% of firms said AI hadn't had any noticeable impact on productivity yet.

And yet, those same companies still expect big productivity gains over the next few years. Another “bubble”.

That's why I don't think there's just one “AI bubble.”

If you don't own AI stocks or run an AI startup, all this might sound like something for Wall Street to worry about.

But it can still affect you.

If the hype cools down, some AI startups will disappear. Funding will get harder. Companies may stop paying for every new AI tool that launches. Some of the promises you hear today will quietly be forgotten.

But that doesn't mean ChatGPT suddenly stops existing or companies stop using AI.

The dot-com bubble is probably the easiest comparison.

A lot of internet companies were wildly overvalued. The internet was still very real. I think AI could be similar.

The technology can be useful while the expectations around it are completely unreasonable.

While economists and investors debate bubble definitions, something else is happening on the ground.

People are getting angry.

Even among 18 to 29 year olds, two thirds feel the pace is too rapid. AI's net favorability is minus 20, which is worse than most political entities.

There are protests forming. Communities are fighting against data centers being built in their neighborhoods. Workers are worried about job losses. Parents are concerned about AI affecting their kids' education and mental health.

So why should you care about all this bubble talk?

If you're building with AI, you need to solve real problems, not just ride the hype. The companies that survive a potential crash are the ones actually delivering value, not just promising it.

If you're investing in AI, understand the difference between the technology being real and the valuations being reasonable. Those are two different conversations.

If you're just trying to understand AI, know that the technology itself isn't going away. It's the financial and hype bubbles around it that might pop.

My take? I think we're in a bubble of expectations, not a bubble of technology. AI is real and it's changing things. But the speed at which we expect it to change everything? That's the bubble.

And bubbles don't last forever.

- Aashish

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