Jeff Bezos calls out "industrial bubble" on AI, while David Solomon expects "drawdown"
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Allie Carl/Axios
Amazon founder Jeff Bezos and Goldman Sachs CEO David Solomon are adding to the chatter among investors that markets are getting overheated due to an AI bubble.
Why it matters: The Dow, S&P 500 and Nasdaq are up 10%, 14% and 18%, respectively, so far this year as bullish investors have piled into AI stocks.
Driving the news: In separate appearances at Italian Tech Week in Turin, Italy, Bezos and Solomon spelled out their concerns.
- "This is a kind of industrial bubble," Bezos said, according to CNBC.
- "I wouldn't be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets," Solomon said. "I think that there will be a lot of capital that's deployed that will turn out to not deliver returns, and when that happens, people won't feel good."
Zoom in: Bezos painted a picture of an investment environment in which early-stage ideas are getting funded despite little substance.
- But he said an "industrial" bubble can still yield meaningfully positive outcomes in the end, after the feverishness tapers off.
- "Investors have a hard time in the middle of this excitement distinguishing between the good ideas and the bad ideas," he said, according to FT. "That's also probably happening today. But it doesn't mean that anything that's happening isn't real. AI is real, it is going to change every industry."
Solomon stopped short of calling it a bubble, though he made it clear that investors may be getting a little too giddy.
- "I'm not going to use the word bubble, because I don't know, I don't know what the path will be, but I do know people are out on the risk curve because they're excited," Solomon said, according to CNBC.
- "And when [investors are] excited, they tend to think about the good things that can go right, and they diminish the things you should be skeptical about that can go wrong ... There will be a reset, there will be a check at some point, there will be a drawdown. The extent of that will depend on how long this [bull run] goes," he added.
The other side: Bullish tech investors say there's a distinct difference between this AI-fueled market and the dotcom bubble of a quarter century ago: This market is underpinned by actual hardware purchases (like Nvidia's chips) and emergent services (like OpenAI's ChatGPT) that offer a clear path to revenue.
- "We believe this tech bull market lasts another 2-3 years and any worries about a tech bubble are way overdone," Wedbush Securities analyst and tech bull Dan Ives wrote Friday. "We see the enterprise spending trends accelerating and not the opposite."
