AI, the market, and the value of possible worlds
Record valuations for artificial intelligence-related stocks are reopening the debate over a possible new tech bubble. But simply comparing today’s multiples with those of the dot-com era risks oversimplifying the issue. When radical innovation greatly expands the dispersion of future scenarios, the value of equity as an option on a firm’s possible outcomes also rises. Markets are pricing not only current earnings and revenues, but also the probability that AI will become a productive platform capable of transforming entire sectors, creating new markets, and accelerating technological progress itself. Toward horizons that have so far been unimaginable.
