Economist Justin Wolfers pushed back against “confident” bears, suggesting that fears of a massive AI bubble may be overhyped and that the soaring valuations seen in the tech sector “actually do make sense.”
AI Bubble Or ‘Beautiful Industrial Revolution’
In a segment on MSNBC, Wolfers framed the AI boom as a potential “beautiful industrial revolution.” He argued that while “it’s certainly possible” the market is in a bubble, the massive investments being made are consistent with a genuine technological shift.
He noted that the valuations could be justified if AI delivers on its promise, automating simple tasks and freeing up human potential for “poetry, sing, walk.”
Despite his optimistic stance, Wolfers’ core message was a stern warning against all forms of conviction in the current market. He cautioned, “Calling bubbles in real time is like trying to spot the top of Mount Everest while you’re still climbing.”
He stressed that the peak is only obvious “when you start going downhill,” adding, “Anyone who expresses certainty… shouldn’t.”
Bulls Versus Bears On AI Bubble
Wolfers’ suggestion that valuations may be rational echoes Wall Street’s most bullish takes. Goldman Sachs recently dismissed bubble concerns, projecting an $8 trillion opportunity and arguing that current investment levels are sustainable.
Wedbush analyst Dan Ives famously called this the “second inning” of the revolution, declaring the “AI party” is still early at “10:30 PM.”
This view stands in stark contrast to dire warnings from bears. Investment firm GQG Partners recently labeled the market “Dotcom on steroids,” arguing today’s conditions are worse than the 1999 crash due to “deteriorating company fundamentals.”
Crescat Capital amplified this, noting that top tech stocks are now valued 270% higher as a percentage of GDP than at the dot-com peak.
See Also: Fear Of An AI Bubble? This Time Is Different, Goldman Says
Wolfers’ Cautious Bubble Stance Comes With ‘Non-AI Recession’ Warning
Wolfers’ commentary ultimately invalidates both extremes. “People who are confident there’s a bubble… they’re almost always wrong,” he stated. “If we actually knew, we wouldn’t be in the bubble.”
However, last week he argued that the U.S. is effectively operating as "two economies" where a massive AI boom is concealing significant weakness in all other sectors. He stated that without the surge in AI-related investment, the country is "on the cusp of a non-AI recession."
AI-Linked Stocks And ETFs Shine Bright Like A Diamond
While the S&P 500 index has gained 13.55% year-to-date, most of the AI-linked stocks and exchange-traded funds have outperformed the market. Here is a list that investors could consider.
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF (NYSE:IYW) | 23.58% | 23.58% |
| Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) | 21.07% | 24.10% |
| First Trust Dow Jones Internet Index Fund (NYSE:FDN) | 13.94% | 26.38% |
| iShares Expanded Tech Sector ETF (NYSE:IGM) | 24.99% | 29.97% |
| iShares Global Tech ETF (NYSE:IXN) | 24.04% | 24.78% |
| Defiance Quantum ETF (NASDAQ:QTUM) | 33.48% | 72.22% |
| Roundhill Magnificent Seven ETF (BATS:MAGS) | 18.78% | 34.72% |
| Stocks | YTD Performance | One Year Performance |
| Nvidia Corporation (NASDAQ:NVDA) | 32.47% | 27.49% |
| Apple Inc. (NASDAQ:AAPL) | 3.46% | 6.69% |
| Microsoft Corp. (NASDAQ:MSFT) | 22.70% | 22.64% |
| Amazon.com Inc. (NASDAQ:AMZN) | -3.26% | 12.68% |
| Alphabet Inc. (NASDAQ:GOOG) | 33.13% | 53.07% |
| Meta Platforms Inc. (NASDAQ:META) | 19.64% | 24.65% |
| Tesla Inc. (NASDAQ:TSLA) | 15.83% | 100.74% |
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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