'The bubble is ahead of us': hedge fund exec says investors still don't get how big AI is

In a recent discussion, Greg Jensen, co-chief investment officer at Bridgewater Associates, cautioned that investors may be underestimating the magnitude of the AI revolution. During his appearance on the 'In Good Company' podcast, alongside Nicolai Tangen, CEO of Norges Bank Investment Management, Jensen emphasized that the market is on the brink of significant changes driven by artificial intelligence. Jensen, who has dedicated over a decade to machine learning, believes that the current market sentiment is still unaware of the profound transformations AI will bring. He asserted, "The bubble is ahead of us, not behind us," indicating that investors should prepare for an influx of capital that could reshape various sectors. While some prominent figures, including Bill Gates and Michael Burry, have drawn parallels between the AI boom and the dot-com bubble, Jensen argues that we have yet to enter the speculative phase. He claims that many investors are still grappling with the sheer potential of AI and its implications for markets, geopolitics, and economic growth. According to Jensen, the urgency felt by AI leaders such as Elon Musk, OpenAI's Sam Altman, and executives at Google is unprecedented. They perceive the stakes as existential, suggesting a departure from typical profit-driven motives. This perspective has led to a relentless pursuit of resources, with significant investments continuing despite inflated valuations and rising costs. This phenomenon has resulted in what Jensen describes as a 'resource grab phase.' The demand for data-center real estate, advanced chips, and talent is creating bottlenecks in the tech industry. Jensen noted that there are fewer than a thousand individuals worldwide who qualify as leading AI scientists, and the intense competition to recruit these experts is impeding scientific advancements. Drawing a comparison to professional sports, Tangen likened the current market dynamics to the transfer season in soccer. Jensen concurred, pointing out that while AI's influence on the market grows, many investors remain fixated on established winners, overlooking broader economic trends. He observed that U.S. equities, excluding major AI players, have begun to lag behind global counterparts, signaling underlying economic shifts. Furthermore, Jensen highlighted that AI-related capital expenditures have become substantial enough to impact macroeconomic indicators, estimating that AI investments have contributed approximately one percentage point to U.S. GDP growth this year. He warned that the world is entering a 'more dangerous phase' of the AI cycle, characterized by resource scarcity, escalating expenditures, and heightened competition. Jensen concluded that many investors are still unprepared for the seismic shifts that lie ahead.