‘Never Happened in History,’ Ex-Bridgewater Exec Warns AI Market Is Priced to Perfection
Key takeaways
- The AI market is priced to perfection, and investors should be cautious, according to former Bridgewater executive Bob Elliott.
- Annual spending of $600 billion to $700 billion would equal about 2% of gross domestic product.
- Many high-value components are imported from Taiwan and South Korea.
- Current annualized AI revenue is roughly $130 billion to $150 billion.
What happened
Former Bridgewater executive Bob Elliott warns that the AI market is priced to perfection, citing unprecedented productivity growth, aggressive household dissaving, and a circular flow of capital among tech companies.
Why it matters
Elliott argues that the current economic scenario is unsustainable, requiring 25% earnings growth, which has never happened in any economy in history. He also notes that the market is experiencing an 'expectations mania,' pricing in an extraordinary outcome several years into the future.
Short-term and longer-term
Short-term. Investors should be cautious of the AI market, as it is priced to perfection.
Longer-term. The AI market is a bubble waiting to burst.