Harvard's Rogoff Sounds Alarm On AI Stock Boom, Cites ''Big Tech...Less Likely To Face Anti-Monopoly Regulation'

The recent surge in tech stocks, driven by the promise of unregulated artificial intelligence (AI), may be a bubble waiting to burst, according to a Harvard economist.

What Happened: Ken Rogoff, a renowned economist at Harvard, has warned that the ongoing stock market rally, fueled by the belief that AI will remain unregulated, could lead to a bubble, Business Insider reported on Monday.

“The current stock-market rally is partly fueled by the expectation that AI will remain unregulated, despite the potential displacement of tens of millions of workers, the threat of political instability, and the distortion of public discourse,” Rogoff wrote.

This optimism has been further fueled by the introduction of ChatGPT in late 2022, leading to a frenzy around AI technology and a subsequent stock boom.

“With political gridlock becoming the norm in Washington, the Big Tech firms accounting for a large share of the stock market’s recent gains, owing to an AI boom, are less likely to face anti-monopoly regulation,” Rogoff added.

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Rogoff suggested that regulators should learn from the post-2008 financial regulation era to mitigate potential risks. However, he believes that not enough is being done to counter these risks, especially by the current administration.

Why It Matters: The warnings by Rogoff come in the wake of other experts raising concerns about the sustainability of the AI stock frenzy. Renowned finance professor Jeremy Siegel recently warned that the soaring valuations of tech stocks, including NVIDIA, may indicate an impending bubble.

Similarly, veteran investor Bill Smead cautioned that the AI stock mania could be headed to a bad ending, likening the current market climate to previous bubbles and suggesting a major correction may be on the horizon.

However, some industry leaders, like Elon Musk, have suggested that the current AI trend may be the right move. Musk recently stated that venture capitalists who have previously been bullish on cryptocurrency and AI may be correct in their latest prediction of a shift toward hardware and manufacturing.

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