He added that while some investors may get burned, “the aggregate value of what’s being created is significant” and therefore, rational.<\/p>\n<\/p>\n
El-Erian, who previously chaired former President Obama’s Global Development Council, explained that this bubble \u2014 unlike the dot-com craze of the late 1990s \u2014 is underpinned by real technological progress and extraordinary long-term potential.<\/p>\n
“The good news is that it’s a construct that will make us more innovative, more competitive,” he said. “The bad news is there will be tears, there will be losses because elements of it are elements of a bubble.”<\/p>\n
Catch up on the latest moments from Yahoo Finance Invest<\/a><\/p>\n Signs of excess are already visible, El-Erian said, particularly in three areas. The first is what he describes as the “frontier,” or companies building foundational models.<\/p>\n “Not all of them are going to succeed, and yet all of them are attracting significant investment,” he said.<\/p>\n El-Erian also pointed to a largely overlooked challenge: the issue of “diffusion,” or getting AI technology integrated across the broader economy.<\/p>\n “Diffusion means getting AI into the workplace in an orderly … comprehensive fashion,” he said, noting the US lacks a clear national policy compared with countries like China. “We’ve got to get diffusion right, otherwise the promise of AI is not going to be fully realized.”<\/p>\n That policy gap could determine whether the US actually benefits from the AI revolution. So far, job security appears to be the most immediate casualty. According to a report<\/a> from Challenger, Gray & Christmas, October saw the largest number of layoffs since 2003<\/a>. In the technology sector, job cuts were largely tied to restructuring and AI integration.<\/p>\n El-Erian added that corporate behavior also reflects bubble-like tendencies. AI’s early movers like OpenAI (OPAI.PVT<\/a>), Anthropic (ANTH.PVT<\/a>), and Alphabet (GOOG<\/a>) are commanding staggering valuations. But many companies are now branding themselves as AI-powered simply to attract investor attention \u2014 a dynamic that echoes the dot-com era.<\/p>\n Still, El-Erian said, it makes sense investors are pouring billions into the nascent technology, even as signs of froth begin to emerge.<\/p>\n","protected":false},"excerpt":{"rendered":"Artificial intelligence may be the hottest trade on Wall Street \u2014 but that doesn’t mean it won’t end…\n","protected":false},"author":2,"featured_media":289412,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[181,28,101,160,65550,152060,152061,152062],"class_list":{"0":"post-289411","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-artificial-intelligence","9":"tag-business","10":"tag-economy","11":"tag-investors","12":"tag-mohamed-el-erian","13":"tag-president-obama","14":"tag-rational-bubble","15":"tag-technological-progress"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/289411","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=289411"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/289411\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/289412"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=289411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=289411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=289411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}} Mohamed El-Erian, Chief Economic Advisor of Allianz, speaks at the Milken Institute Global Conference in Beverly Hills, California, U.S., May 2, 2016. REUTERS\/Lucy Nicholson \u00b7 REUTERS \/ Reuters <\/p>\n