There are several truisms when it comes to tech bubbles. One is that it’s often difficult to see one when you are inside it: each individual spending or investment decision can seem rational, even if the net effect looks extreme.
When there’s general agreement that a bubble is forming, it often has much further to inflate and investors who bail early miss out. And after a bubble has burst, it can take years to work out whether it was just the product of hype or the precursor to an even bigger tech boom ahead.
As US tech companies enter their latest earnings season, a distinct giddiness has started to creep into tech valuations on Wall Street. The middle of 2024 was always destined to be something of an “air pocket” for generative artificial intelligence. The investment boom triggered by the technology has been all too visible, but it takes time for all that new capacity to be put to productive use by the tech industry’s end customers. Wall Street’s patience is about to be put to the test.