IMF chief economist compared AI boom to dotcom bubble

IMF chief economist Pierre-Olivier Gourinchas stated that the world has already traveled halfway to a burst AI bubble and a new financial crisis.

A sharp slowdown in US economic growth against the backdrop of multi-billion investments in AI infrastructure won’t happen, as the economist believes. But the flow of this money contributes to inflation growth. And here it gets interesting: the IMF doesn’t exclude that the bubble formed in the market due to the boom could burst and provoke a global financial crisis.

Meanwhile, investors fear that some companies will get returns from huge AI investments not soon at all, if they get them at all.

And here’s the Gourinchas quote that puts everything in its place: We haven’t yet reached the level of investment surge that was observed during the dotcom boom, we haven’t yet reached the level of inflated valuations on stock markets. But we’ve possibly traveled half or 2/3 of the way.

Comparing the AI boom to the dotcom bubble, the expert noted that investors now feel richer because stocks are expensive. They get profits from value growth, so consumption is high, investments are high. But the economy isn’t producing more yet – these are promises for the future, and this creates demand pressure.

The problem is that investors are enthusiastic about promises of future profits. But how long their patience and optimism will last – that’s a big question.