"What's the difference between a healthy boom and a dangerous bubble? According to Azhar, the two are very similar, but a bubble is "a phase marked by a rapid escalation in prices and investment, where valuations drift materially away from the underlying prospects and realistic earnings power of the assets involved." In a boom, by contrast, the fundamentals eventually catch up."
"Azhar's framework for determining which situation we're in relies on five indicators-economic strain, industry strain, revenue momentum, valuation heat, and funding quality-which have been tested against past boom-and-bust cycles and converted into a live dashboard. According to this dashboard, if none or one gauge is in the dangerous or "red" zone, it indicates the AI industry is still in a boom; two reds mean caution; and three or more mean imminent trouble and definite bubble territory."
A framework measures key AI industry stressors on a three-level scale: safe, cautious, dangerous. Five indicators form the framework: economic strain, industry strain, revenue momentum, valuation heat, and funding quality. The framework has been tested against past boom-and-bust cycles and converted into a live dashboard. The dashboard assigns colored zones; zero or one red gauge signals a continued boom, two reds indicate caution, and three or more reds signal imminent trouble and bubble territory. Since launch in September, only one gauge has entered the red zone, implying the industry remains in boom conditions.
Read at Fortune
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