AI bubble? WEF chief warns, tech market is slowing down
Amid sharp falls in global tech stocks, the head of the World Economic Forum (WEF) is toning down the mood. Borge Brende, during a visit to Sao Paolo, pointed to three potential, related bubbles on the horizon: cryptocurrencies, sovereign debt and, crucially for the IT sector, artificial intelligence.
Brende’s comments came at a time when markets are correcting their record highs and valuations of many companies, especially those related to AI, look overvalued. While analysts and brokers recommend caution rather than panic, the warning from Davos is significant. Brende highlighted that current government debt is the highest since 1945, significantly narrowing the room for manoeuvre in the event of a potential crisis.
Artificial intelligence itself, which has fuelled market optimism and expectations of an economic revolution over the past months, is seen by the WEF chief in two ways. On the one hand, it offers the promise of unprecedented productivity gains. On the other, it poses a real risk to many white-collar jobs.
Brende used a suggestive comparison to the emergence of a new ‘rust belt’ (Rust Belt) in city centres, where office work could be massively replaced by algorithms. In doing so, he pointed to recent announcements of job cuts at global corporations such as Amazon and Nestle.
However, the WEF president pointed out that in the long term, technological change has historically led to productivity growth. It is this, he concluded, that is the only sustainable driver of wealth growth and real wages in society.
At least two key lessons flow from this. Firstly, strategic caution and a deep review of AI-based investment valuations is needed, separating real potential for productivity growth from market speculation. Second, Brende’s warning of a new ‘rust belt’ for white-collar workers sends a direct message to boards; companies need to plan now for a deep workforce transformation, investing in reskilling and adapting operating models. In an unstable macroeconomic environment marked by record debt, relying solely on technological optimism is becoming highly risky.
