Good morning. Andrew here. If there is one question that has been asked more than any other this year in the business world, it is this: Are we in an artificial intelligence bubble? DealBook’s managing editor, Brian O’Keefe, takes a look at all the arguments for and against that possibility — so you can make up your own mind. Also: There’s a delicious story in The New Yorker that we highlight this morning in Best of the Rest about a unique phenomenon: Apparently, millennials love getting prenups. (Was this newsletter forwarded to you? Sign up here.)
‘Eventually you get a bubble’It’s the burning question that everyone from Wall Street traders to retail investors is asking right now: Are we in an artificial intelligence bubble? James van Geelen, a market analyst who spends a lot of time thinking about A.I.’s potential as a disruptive force in markets and business, gets the question a lot. And he’s quick to answer: “If we’re not, we’re going to be,” van Geelen, the founder and C.E.O. of Citrini Research, which specializes in megatrend investing ideas, told DealBook. “Show me an instance over the past 300 years of a truly transformative technology that didn’t result in an asset bubble — railroads, steam engines, radio, airplanes, the internet,” he said. “When capital floods into a technology because everyone realizes that it’s transformative, eventually you get a bubble.” If OpenAI’s launch of ChatGPT in November 2022 was the watershed moment that brought A.I. to the masses and launched a global race to dominate the technology, then 2025 was the year that the technology transformed markets and the global economy in newly powerful ways. Investment in A.I. may have accounted for as much as half of U.S. G.D.P. growth in the first half of 2025. President Trump has taken notice. From the start of his second term, the president has made A.I. superiority a pillar of his business agenda. And he has put state regulators on notice that they’re not to slow down the sector. That economic firepower (and a policy embrace from the White House) has been reflected in the stock market. In mid-December, the so-called Magnificent 7 tech giants — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — made up 34 percent of the value of the S&P 500. In late October, Nvidia, whose semiconductors power much of the world’s biggest A.I. models, became the first company in history to hit $5 trillion in market valuation. (It’s a mere $4.5 trillion today.) And the Morningstar Global Next Generation Artificial Intelligence index was up roughly 40 percent in 2025 through mid-December, doubling the tech-heavy Nasdaq Composite index.
It’s that outsize performance that has many investors fretting about a bubble. In Deutsche Bank Research’s annual survey of global asset managers, 57 percent of respondents picked waning enthusiasm for A.I. and a drop in tech valuations as the biggest threat to the bull market rally, easily outpacing concerns about Fed policy. “I think it is misleading to try to encapsulate everything in the idea of one bubble, because there are at least three bubbles worth talking about in terms of valuations, investment and technology,” Adrian Cox, thematic strategist at Deutsche Bank Research, told DealBook. “And in each of those, I think there is evidence that there is some inflation going on which could at some point become a bubble, which could at some point burst. But at the moment, it still feels as though we’re in the early stages of that process.” Van Geelen of Citrini Research sees the technology becoming a transformative productivity tool for businesses in the near future. He singles out A.I. in robotics and agentic A.I. — autonomous systems that can plan, research and work toward goals with limited human supervision — as potential game changers. “People were talking about this last year, but the technology just wasn’t there,” he said. “And now it really is.” Building as fast as they can But to get there requires a lot of data centers. That need has unleashed a construction boom for the ages, one that has put serious strain on local resources and has unleashed a torrent of debt-fueled spending. Electricity consumption at U.S. data centers is projected to more than double last year’s total by 2030, according to the International Energy Agency. That thirst for power is contributing to rising costs for everyday Americas, and could become a major issue in next year’s midterm elections. In the latest example of this dash to secure electricity supplies, Google’s parent, Alphabet, agreed yesterday to acquire the clean energy developer Intersect Power in a $4.75 billion all-cash deal, with an eye toward powering Google’s data centers. The sheer volume of investment needed to fund this boom has spooked some on Wall Street. According to Bloomberg, tech giants including Microsoft and Meta have agreed to spend some $500 billion total to lease data centers over the next several years. Oracle alone has committed to $248 billion on such leases — news that caused its stock to tumble earlier this month. More optimistic observers argue that the Mag 7 companies funding much of the build-out have the cash flow to do so without taking on onerous debt loads.
Brian Colello, a senior analyst at Morningstar, doesn’t see any major red flags. In fact, he believes some of the A.I. build-out’s inherent challenges will help keep the industry from moving too fast. The sheer cost of the chips required to run sophisticated A.I. models, he contends, as well as the fact that they become obsolete after a few years, means that companies are less likely to overspend for computing power they don’t need. (Contrast that with the dot-com bubble, when billions flowed into laying more fiber-optic cable than the market demanded.) That, and the electricity constraints, could slow the infrastructure build-out. But, ultimately, it won’t slow down the sector. “We would argue there is no A.I. bubble to date, and we think it’s unlikely there will be one in 2026 as well,” Colello told DealBook. “We’re seeing A.I. demand still exceed supply. We’re seeing the hyperscalers increase their capital spending plans, and we’re seeing an A.I. supply chain doing everything it can to meet this booming demand.” Tech-tonic shifts If any one company encapsulates the wild enthusiasm for — and deep skepticism about — A.I. right now, it’s OpenAI. ChatGPT has some 800 million active users. But just a small fraction are paying customers. Sam Altman, OpenAI’s C.E.O., recently said it was trending toward an annualized revenue run rate of $20 billion by the end of this year. But it’s also planning to spend gargantuan sums on infrastructure: It has committed $1.4 trillion to building data centers over the next eight years. Despite that accounting disconnect, the start-up continues to raise money at eye-watering valuations. In March, SoftBank led a funding found that valued the company at $300 billion. And its most recent financing round, in October, put a $500 billion value on OpenAI. Last week, it was reported that OpenAI is in talks to raise a $100 billion round that would value the company at $830 billion. There’s also buzz about an I.P.O. in 2027.
Even as OpenAI seeks to monetize its enormous user base, the competition is getting tougher. Google’s Gemini 3, which debuted in November, was recently ranked above ChatGPT in industry benchmark performance testing. Anthropic, the rival start-up founded by former OpenAI executives, has focused on enterprise applications. The newest version of its Claude chatbot can work autonomously with little oversight for 30 hours. (When The Wall Street Journal let Claude run a vending machine in its office, however, it lost hundreds of dollars.) Then there are open-source A.I. models, like that of the Chinese start-up DeepSeek and Alibaba’s Qwen, which are attracting a wave of start-ups to build with their architecture. Van Geelen believes there’s room for multiple models. And he cautions that what may look like slow progress now in integrating A.I.-powered tools into everyday business operations could change rapidly. “Technology progresses at an exponential rate,” he said, “and humans adopt technology at a linear rate.” But humans are going to need to move faster, because van Geelen thinks that 2026 is the year when A.I. will begin replacing people in certain jobs, and companies outside Silicon Valley will start reaping the rewards of improved efficiency. By this time next year, we may be pondering a new question altogether: How big can the bubble get?
Novo Nordisk stocks rally on a key regulatory win for its Wegovy treatment. The Danish drugmaker’s weight-loss drug will be available for sale in pill form next year in the U.S., the F.D.A. ruled yesterday, potentially opening the company to a much wider market. Shares in the company have rebounded in the past month on hopes its turnaround plan will help it restore market share. But its biggest competitor, Eli Lilly, is expected to release its own weight-loss pill in March. The Trump administration takes aim at wind farms, pausing $25 billion worth of East Coast projects. The move is the latest by President Trump, a longtime critic of the technology, to dismantle efforts by his predecessor, Joe Biden, to develop alternative energy sources. The decision puts in doubt five wind projects that were expected to power more than 2.5 million homes and businesses, and it sank shares of energy companies tied to the projects. The decision drew the anger of politicians and could prompt legal challenges. The S&P 500 is on pace for an eighth straight month of gains. The benchmark index has racked up a three-day winning streak, enough to push it into the green for the month on traders’ hopes that the Fed will lower borrowing costs at least twice next year (although S&P 500 futures this morning point to a lackluster opening). The real market stars continue to be gold, silver and copper, which extended their record-setting run this morning. “Heritage has always welcomed debate, but alignment on mission and loyalty to the institution are nonnegotiable. A handful of staff chose a different path — some through disruption, others through disloyalty.”— Andy Olivastro, the chief advancement officer for the right-wing Heritage Foundation. He was criticizing former colleagues who left the think tank recently amid a wider ideological dispute that has gripped the conservative movement during President Trump’s second term. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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