"Over the past year, the pace of investment in the AI sector has been extraordinary, with valuations in some cases outpacing actual revenue or commercial maturity. That said, the underlying technological progress and the breadth of applications being developed justify part of this optimism. AI is not just another tech trend but a foundational shift that's still in an early growth phase."
"The risk isn't necessarily that the AI sector itself is overvalued, but that expectations in public and private markets may be running ahead of near-term fundamentals. Corrections or valuation adjustments could happen, but they'd likely be part of a natural rebalancing as the market distinguishes between sustainable business models and speculative excitement. Overall, some caution is certainly warranted - but this shouldn't be characterised as a 'bubble' in the traditional sense. The long-term value creation potential of AI remains substantial, even if short-term volatility increases."
The Bank of England's Financial Policy Committee warned that the risk of a sharp market correction has increased because equity valuations appear stretched and vulnerable if AI expectations fade. The IMF noted similar global market vulnerabilities tied to inflated AI valuations. Rapid investment has, in some cases, outpaced revenue and commercial maturity, while technological progress and broad application development justify partial optimism. Market expectations may be running ahead of near-term fundamentals, making corrections or valuation adjustments likely as markets separate sustainable business models from speculative excitement. Caution is warranted, but AI retains substantial long-term value potential despite short-term volatility.
Read at London Business News | Londonlovesbusiness.com
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