I bet the same thing happens when the AI bubble pops.

"but this time is different, it's not a bubble, there's real value there"

Economists use the term “bubble” to describe an asset price that has risen above the level justified by economic fundamentals, as measured by the discounted stream of expected future cash flows that will accrue to the owner of the asset.

I think there's little argument that is happening, the question is more about to what extent is it a bubble.

The entire global software industry is worth less than $1 trillion dollars. Or in other words smaller than the current valuation of just OpenAI + Anthropic.

Planned capital investment this year by the Magnificent 7 alone is $600B. More than 2/3 of the total global software industry. In one year. Good luck buying any computer hardware this year, there will be a shortage of everything, including electricity.

It's a bubble. But when does the music stop?

  The entire global software industry is worth less than $1 trillion dollars. Or in other words smaller than the current valuation of just OpenAI + Anthropic.

Is Microsoft 3x more important than OpenAI and Anthropic combined? Personally no. I think the value generated by OpenAI and Anthropic will surpass Microsoft.

> The entire global software industry is worth less than $1 trillion dollars

Are you saying "worth" as a shorthand for something like annual profit? If you sort the 2025 data by earnings, you get pretty large numbers quickly: https://en.wikipedia.org/wiki/List_of_largest_technology_com...

That's not how you should measure "worth". In that world, you'd have a P/E ratio of 1. Comparing to a bond, it would be like expecting to get paid the face amount in a single year. Many people are quite happy with 5-10% interest as a risky benchmark, so 10-20 P/E isn't wild. That puts the market cap for tech itself at 10-20T as a reasonable baseline.

How long did it take for housing to stop skyrocketing?

That's my guess.

Aka: take a seat, it will be a while

At this point I agree. A bubble starts when everyone stops calling it a bubble.

If it's a bubble that big it's

1) the only reason any part of the economy is growing at all

2) the only reason US banks aren't bankrupt due to the commercial real estate debacle they got themselves into

In other words, if this is a bubble, if this pops, we're back in the 2008 situation. Where banks will go bankrupt one after the other like dominoes (in the sense that this amount is large enough that large banks will fail their financial obligations). And you can argue as much as you want based on "real" valuation metrics but none of your investments, not even cash dollars or even gold, will come out of that one intact.

Fortunately, there's the counterargument: you know what else is higher than ever? The revenue produced by the software industry. To the point that at the moment you can say, as crazy as it sounds: if revenue of the big software firms keeps growing the way it IS currently growing, this is not enough investment.

In case you're wondering what exactly that means, not enough investment. Think of it like this: you're selling shoes. If you invest too little in new shoes (or whatever resources you need to sell shoes), then you will have to tell customers coming in "sorry, all out of shoes, take your money elsewhere". Currently it's not enough investment. If this growth rate keeps up for 1.5 years, Amazon will have to close the store to anyone who wants more machines, in fact they are turning away large customers right now at Amazon, Google and Microsoft. That's where the "spend more now" madness is coming from. Is it unjustified?

Well, it appears not.

The problem is "markets can stay irrational longer than you can stay solvent". It doesn't matter when the bubble pops if the governments (especially the US') bail those companies out.

The damage is already being done, whether you are a 401k/IRA holder with a position on the S&P 500 way too overweighted by the Mag7&co and their circular dealings, or just needing to buy computer parts way over their market value because some companies are over-leveraging to outcompete you for that hardware (or electricity), or even at a smaller scale by increasing software costs because everything is "AI-powered" now and of course you wouldn't want only "deterministic" software that just works and doesn't have a slop machine integrated.