A bubble that knows it's a bubble

Summary

The four words that precede every crash: “This time is different.” Except this time, the person warning about a bubble is Sam Altman, the CEO most responsible for creating it. When OpenAI’s chief executive warned last week that investors were “overexcited” about AI, markets reacted immediately. Nvidia fell 3.5%, Palantir dropped nearly 10%, and the selloff spread globally. The warning came amid a cascade of seemingly supporting data. That same week, MIT researchers published findings that 95% of companies investing in generative AI were seeing no measurable returns. Apollo Global Management’s chief economist warned that current valuations exceeded even dot-com bubble peaks. And Federal Reserve data showed AI investment consuming more than half of America’s total capital expenditure. The numbers tell the story. Anthropic raised $450 million at a $4.1 billion valuation despite negligible revenue. Character.AI hit $1 billion in valuation with 1.7 million monthly users—roughly $588 per user. Inflection AI raised $1.3 billion before essentially acqui-hiring its team to Microsoft, leaving investors with an empty shell. Ray Dalio, founder of Bridgewater Associates, told the Financial Times the current environment mirrors 1998-1999, warning that while AI will certainly transform the economy, investors are “confusing that with the investments being successful.” Sound familiar? It should. This exact sequence—revolutionary technology, abundant capital, speculative frenzy, then sudden reality checks—has played out with remarkable consistency for over 180 years. Railway Mania in the 1840s. Radio stocks in the 1920s. Dot-com fever in the 1990s. Each time, the technology was real. Each time, the speculation was unsustainable. Each time, the overbuilding became tomorrow’s foundation. The Original Tech Bubble: When Britain Went Mad for Railways To understand what’s happening with AI today, we need to travel back to 1840s Britain, where the world’s first true technology bubble was ta...