The Badger was browsing in a shop when Hubble Bubble (Toil and Trouble) by Manfred Mann featured in the piped music. It struck a chord with the recent warnings by JP Morgan’s CEO, the Bank of England, and others, that an AI bubble could pop. Later that day, while clearing a cupboard, the Badger found his old school notes for Shakespeare’s Macbeth, part of the English Literature syllabus of the time. Scribbled notes about the three witches uttering ‘Double, double toil and trouble: fire burn and cauldron bubble’ caught his eye. The coincidental combination of the song title, these scribbles, and the AI warnings triggered some contemplation on the AI bubble.
During the dot.com debacle of the early 2000s, the Badger was a senior member of a UK, stock-exchange listed, IT services company. Such companies, investors believed, would benefit from the dot.com boom. The company’s share price thus rose ~tenfold before collapsing back to its original level when the market realised that dot.com companies were massively over-valued, and many had little real revenue let alone profit. For years following the crash, doing business in the IT sector was tough. The NASDAQ, for example, crashed from around 5000 to 1100 and it took ~15 years to recover. Many dotcoms disappeared, but the likes of Amazon, eBay, Google and others rose from the ashes to become the powerhouses of recovery. Having worked in IT throughout the debacle, the Badger’s instincts are alive to tech bubbles. Today they ring alarm bells.
Whether AI’s a market bubble that bursts, or a transformation that sticks, depends on whether company valuations are grounded in real, scalable, business fundamentals, or speculative optimism. Either way, AI is unlike anything seen before, so when JP Morgan, the Bank of England, the World Economic Forum and others have some anxiety, then we should take note, especially as, for example, Nvidia, Anthropic, and OpenAI’s market values have risen many-fold in just two years. There’s unprecedented spending on computational infrastructure, massive bets on future productivity gains, and belief that AI will revolutionise everything. The actual return on investment, however, has not been impressive so far. When the UK National Cyber Security Centre advises organisations to have plans to operate their business without access to computers following a cyber-attack, the hype of an AI dominated future seems a little questionable.
The Badger’s learned from his dot.com era experience that it’s prudent to be wary. If market valuations become detached from fundamentals, or the availability of computational infrastructure stalls, or the promised productivity gains for organisations don’t materialise, or geopolitically driven export controls cause disruption, then any AI bubble will pop triggering a huge domino effect. AI is facing a ‘Macbeth moment’. Witches making prophecies surround the bubbling AI cauldron uttering ‘double, double toil and trouble; fire burn and cauldron bubble’. In the play, Macbeth felt a sense of foreboding…as do more and more of today’s leaders….
