Devina Mehra: Whether there’s an AI bubble or not is a big question—here’s the lowdown on what’s brewing

The question I am asked most often these days is whether there is an artificial intelligence (AI) bubble forming in global markets. Rather than offering my opinion, let me tell you some facts.Yes, I do have concerns. Especially if one looks at the US market.

Its move has been very narrow. It has basically been a tech move, and even within that, just a handful of companies have been powering the whole rally.Even globally, the whole equity market move has had a contribution of 70% from technology stocks. Among Nasdaq shares, the biggest returns have come from companies with either no revenues or no profits.

And there is this mindset around new technologies, an almost irresistible urge to ‘go chase the next new thing.’ But it’s often just a mirage. Because the real questions are:How long will this new technology take to succeed? Who will actually succeed? Or, to be specific, which particular technology and which company will succeed? And, most importantly, will even that company make enough of a return on capital employed? Let us go back to the dotcom boom. Back then, there was this thinking that if the internet will be used by everybody in the world—which turned out to be true—then you cannot go wrong investing in companies that are building the infrastructure for it.The internet is carried across the world on undersea cables.

There was a company called Global Crossing that laid many of these cables. These are still in use, but the company went bankrupt more than 20 years ago. So it is not only about whether a particular technology succeeds.