As the Federal Reserve raised an alarm over rising inflation partially fueled by the AI (Artificial Intelligence) boom, analysts at Bull Theory have pointed to warning signs of an AI stock bubble burst.
The analyst noted that investors should consider a potential AI stock bubble burst as private AI valuations get treated as spendable currency in real estate deals, according to an X post on July 12, analyzed by Finbold on July 13.
“This is the same trade running backward. Instead of borrowing against inflated houses to buy assets, people are spending inflated private stock to buy houses,” the analyst noted.
The analyst compared today’s AI stock valuations to the pre-2008 crash, when people borrowed against home values that turned out to be fake, and the debt outlived its value.
Why is the AI stock bubble burst imminent?
The analyst warned of an imminent AI stock bubble burst as unpriced private stock gets spent like real money. Furthermore, San Francisco home sellers are now accepting shares of OpenAI and Anthropic as payment, even though neither company has gone public.
For example, Nima Gabbay, a real estate investor, listed his home for $2.995 million and accepted shares of OpenAI and Anthropic instead of cash, according to a post from The New York Times. One OpenAI employee bid over $1 million above the asking price, which Gabbay believes reflects the buyer inflating his own stock’s value to make the offer look bigger.
Meanwhile, the entrepreneur Vijay Chattha offered a $500,000 discount on his $2.5 million home to anyone paying in Anthropic stock, but it has not sold yet.
Top AI companies likely to be affected
Amid rising fears of a potential AI stock bubble burst, the top AI companies could experience more selling pressure. Some of the top AI companies likely to be affected include Space Exploration Technologies Corp. (NASDAQ: SPCX), Nvidia Corp. (NASDAQ: NVDA), and International Business Machines Corp. (NYSE: IBM).
