Should we worry about the AI-hype and the stock market?

What the experts say about AI's value creation, and if there might be a bubble

Anna Loverus

05 Oct 2025 — 4 min read

The rain is currently pouring outside, and I’m writing this newsletter in a candlelit kitchen, eating home-baked rye bread with butter and cheese. It’s one of the first dark mornings this autumn.

My family have a country house, and there is no better place to be when there is a storm. We can manage most weather conditions, staying warm with wood-burning fireplaces and entertained by analogue projects.

Yesterday, it was homemade müsli, apple cake, and rye bread, along with organising and decluttering all the fabric we’ve gathered over the years — deciding what to keep, what to sell, and what to give away.

My mum keeps asking, “Do you know what this is …” or “Do you want to know how to make …” and I feel like it’s a luxury to have access to a wealth of knowledge that was foundational to a good life before we became accustomed to buying everything in a store — things made in factories far away.

Perhaps it is time to redefine the idea of being a prepper from someone who hides canned food in the forest to someone who knows the recipe for “Apple Scone Cake” out of their head and bakes bread with sourdough when there is no yeast in the house.

Being aware of what we take for granted is a first step.

But now, let’s move to a very different topic …

This week, Deutsche Bank released a report on the signs of the AI market being a financial market bubble.

While the search trend for “AI bubble” appears to have cooled off, there are still several signs that asset values are significantly above the intrinsic values of the assets being traded. In simple terms, people buy AI stocks for considerably more than the economic value the AI companies generate.

They also write, “Identifying a bubble is almost impossible, not least because no one agrees exactly what it is”.

However, they draw many interesting comparisons with the dot-com bubble of 2000. Below, you can see what the Nasdaq Composite Index, a stock market index including a large share of technology stocks, looked like before and after the peak.

As you can see, there were more than seven falls of 10% or more during the five years preceding its peak on March 10, 2020. The index then fell by more than a third in 10 weeks during 2000, before recovering about two-thirds of its losses and finally declining 78 per cent in a sawtooth pattern until it reached its bottom in October 2002.

Would an AI bubble look anything like this? Where might we be on the curve? No one knows. But we know this is the last 5 years of NVIDIA's stock value.

Deutsche Bank point out four forces behind the current AI bubble conversations, and comments on each one.

New realism about what AI can and can’t do — “Open AI’s much-anticipated launch of GPT-5 in August turned out to be a disappointment. […] Expectations got ahead of reality and the goalposts shifted. Capabilities that would have been greeted with astonishment 18 months ago were greeted with a shrug.”
Infrastructure bottlenecks ahead — “The rollout of AI has been faster than any previous technology […]. The basic foundations are in place and it is easy for consumers to use. Yet it will only pay off when enterprises can use it at scale, which depends on building – and financing – the most complex infrastructure ever created, comprising chips, data centres and energy.”
Implementation depends on systems — “A new technology itself is not enough. The hard yards are ahead in implementing it. That involves integrating it into well-governed enterprise systems that employees actually use. Evidence is still emerging of where the dollar and cents of value will come.”
Human psychology: “that don’t impress me much” — “There is an inevitable reaction to new technology reflected in the much-quoted Gartner hype cycle: innovation, inflated expectations, disillusionment, enlightenment and, finally, new productivity.”

The report is easy to read, even for non-financial people, so I recommend you take a look and make your own assessment. It quotes several influential economists, including Ray Dalio, who has written the book Principles, which I recommend reading if you are interested in learning how to make better decisions in general.

Personally, I think an additional reason for the AI bubble to burst could come not from the technology itself, but from its consequences. If we start to see more tendencies that entry-level jobs are disappearing and that senior employees are being replaced by AI tools, our current capitalist economy would be in huge trouble, since it depends on people having money to consume.

If AI replace human workers, it will make the economic system as we know it tip over. And while I have a lot of negative things to say about capitalism, and believe the system must change if we want a livable planet, the stock market would tank.

But that is a conversation for another day.

/Anna

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