James Ferguson, founding partner of the UK-based macroeconomic research firm MacroStrategy Partnership, warns that investors’ enthusiasm for AI has created a concentrated market bubble similar to the dot-com era. “These historically end badly,” Ferguson told Bloomberg’s Merryn Somerset Webb on the “Merryn Talks Money” podcast, suggesting that those experienced in the market may anticipate a negative outcome. He expressed concerns that AI’s tendency to produce “hallucinations”—or invented facts and sources—may limit its practical applications.
Ferguson argued that AI remains largely unproven and unreliable, comparing the “fake it till you make it” culture of Silicon Valley to a more cautious approach needed for AI. He emphasized that without trust, AI is “effectively useless” in his view. Furthermore, he highlighted the high energy consumption of AI, referencing a study predicting AI applications could consume as much power as the Netherlands by 2027, which could make AI too costly for many businesses.
The veteran analyst also noted the similarities between current AI hype and the tech exuberance before the dot-com crash, warning investors of potential risks. He pointed out that market returns are once again heavily concentrated in tech stocks with inflated earnings growth estimates, mirroring patterns from the dot-com bubble. This excessive hype, based on uncertain promises, could lead to a similar market downfall.
