In a world where artificial intelligence reigns supreme, stock investors appear unfazed by global unrest and economic challenges. Erik Gordon, a professor at the University of Michigan’s Ross School of Business, claims that the market is ignoring significant threats in favor of AI-centric investments.
“The market shrugs off war in the Middle East, inflation, wild oil prices, and tens of thousands of job cuts,” Gordon told Business Insider. “It fabricated its own universe where the only things that are real are companies with ‘AI’ in their name,” he added.
Gordon pointed to Allbirds as an example. The sneaker company, which recently rebranded itself as NewBird AI to focus on AI infrastructure, saw its stock price soar nearly 600% in one day. “If your company that is yesterday’s news is tanking and you can fool people into thinking you are worth investing in today by claiming to be an AI company, you get the 2026 PT Barnum Award,” Gordon remarked, referencing the famed showman known for his hoaxes.
Amidst this AI frenzy, the S&P 500 has surged over 10% to record highs this month, despite the ongoing US-Iran conflict affecting international trade and energy, leading to soaring oil prices and potential inflationary concerns.
Tech companies have also laid off tens of thousands of employees, attributing the cuts to advancements in AI technology. This trend may further strain household finances and reduce consumer spending, impacting corporate profits.
Skeptics and believers
There are notable critics of the AI boom. Michael Burry, known for “The Big Short,” has warned that major tech companies are experiencing slower growth and overinvesting in AI, which could artificially inflate their values.
Jeremy Grantham, cofounder of investment firm GMO, has expressed that AI is “obviously a bubble” that will eventually burst. Gordon has echoed these concerns, previously stating that the “AI bubble is as big as the planet Jupiter,” and predicting widespread repercussions when it collapses.
In contrast, some investors like Ross Gerber and Kevin O’Leary remain optimistic, citing AI’s role in boosting productivity and driving revenue and profit growth in companies like Nvidia.
Whether the current market trends reflect a disconnect from reality or a calculated bet on AI’s future potential remains to be seen.
