Pepperstone logo
Pepperstone logo
  • Deutsch
  • Trading

    Überblick

    Kosten

    Trading-Konten

    Pro

    Elite

    Active-Trader-Programm

    Handelszeiten

    Wartungsarbeiten

    Firmenkonto

  • Plattformen

    Überblick

    Trading-Plattformen

    Integrationen

    Trading tools

  • Märkte & Symbole

    Überblick

    Forex

    Aktien

    ETFs

    Indizes

    Rohstoffe

    Währungs-Indizes

    Kryptowährungen

    Div. für Index-CFDs

    Div. für Aktien-CFDs

    CFD forwards

  • Analysen

    Überblick

    Markt-Nachrichten

    Tagesausblick

    Wochenausblick

    Vorstellung der Analysten

    DAX Prognose

    Bitcoin Prognose

    Gold Prognose

    Öl Prognose

    EUR/USD Prognose

    Nasdaq Prognose

  • Trading lernen

    Überblick

    Webinare

    Trading Videokurs

  • Partner

  • Über uns

  • Hilfe und Support

  • Professional

  • Deutsch
Volatility

Maybe AI tech is an investment bubble. And that’s okay

Katya Stead
Katya Stead
Financial Writer
26.05.2023
Share
Toward the end of last year, AI burst into the heart and minds of traders and investors everywhere. That’s because OpenAI launched Chat GPT on 30 November 2022, which uses sophisticated artificial intelligence to answer questions with human-like language abilities, with powerful machine learning and reasoning capabilities.

Initially intended as a demo for the technology, the chatbot’s popularity exploded. Less than a week after its launch, the chatbot reportedly had more than a million users. This number had already skyrocketed to 100 million by January, less than two months later.

But now, a different word is being thrown around when a conversation inevitably turns to AI. And that word is: bubble. From articles in the Financial Times,1 to OpenAI’s CEO Sam Altman himself saying the Chat GPT AI craze has likely had its day,2 many are wondering if recent months’ chatbot craze is about to pop.

Now, your own risk appetite and the markets you go for is an individual affair, and it’s up to you to manage that – but it’s no secret that the word ‘bubble’ strikes fear into the heart of the average investor. Despite the fact financial bubbles rarely deflate overnight. Why?

What is a financial bubble exactly?

According to the NASDAQ website, a bubble is “a market phenomenon characterised by surges in asset prices to levels significantly above the fundamental value of that asset.”3

In other words, bubbles are pure hype, where valuations become so outrageous that they cannot be justified even in the most optimistic scenario – where so much speculative capital piles into an asset that eventually there is a tipping point and it ultimately bursts. They’re the siren calls that have ruined countless individual traders and retail investors, whole sectors and even economic empires. The ‘tulip mania’ of Amsterdam at the height of its powers, the 1990s ‘dot com’ fiasco and the housing crash right before the global financial crisis – all are considered previous bubbles.

…But is that really such a bad thing?

Why are traders so afraid of bubbles?

Looking at the above examples of financial bubbles popping history, you can see why it’s a dirty word in financial circles. In fact, most value investors naturally won’t touch bubble-dependent stock with a ten-foot pole, as valuations are at such sky-high levels. But why do they inspire such fear?

Well, that’s because it’s very difficult to get hard data on bubbles, which makes it easy to suffer loss.

As NASDAQ’s website points out: “bubbles are often hard to detect in real time because there is disagreement over the fundamental value of the asset.” 3 There’s a reason for that, and it’s usually the lack of data for traders and investors to study.

Bubbles are typically associated with zeitgeist, things that have caught the public’s imagination and have thus gone the market’s equivalent of viral. These things tend to be new and exciting, or with a fresh new wind in their sails – not the familiar, well-known old assets. Which are very difficult to price, predict and study.

You can understand why bubbles might be an investor’s worst nightmare, then. Investors, who need public companies or established funds to hitch their wagons to, and who need to purchase those, then sell them at the right time in order to profit. Something which is a concept, a vision of what could be and driven to extremes by rampant speculation and market sentiment, perhaps when there isn’t even an IPO to trade on as yet (we’re looking at you, OpenAI) could be a very difficult beast to own indeed.

…But then what about traders?

Preview

Trading places

A lot of the common wisdom spouted online is written for and by those in team investing, and it’s these folks that understandably have such angst about bubbles. But traders are by definition speculators on the financial market pie rather than owners safeguarding their own slice – and they could view all this quite differently.

Many traders are in fact drawn to bubbles because they represent absolute momentum and a strong underlying trend – buy high and sell higher – where emotions and FOMO take hold. That being said, longer-term trading strategists can definitely profit – or lose their shirt – on the rollercoaster that is a bubble forming and bursting. Even if you only get out of a bubble after Minsky’s ‘profit-taking’ stage, when the markets have already started to descend into ‘stage panic’, you’d still likely sell at a significantly higher price than the underlying asset was worth pre-bubble.

Even better, if you’ve chosen to go long on something, for example a stock, that had intrinsic worth before the bubble ever came along, you can likely ride those higher earnings for quite a while. Just look at the latest results by NVIDIA, which has been linked to the AI gravy train from the beginning, especially since Chat GPT itself hilariously confirmed that it uses NVIDIA GPUs.4 And on 24 May, NVIDIA reported Q1 revenues almost $1 billion higher than expected, boosting its share price by more than 25% on the day.

Indeed, for those traders who know their markets and strategy well, ‘bubble’ is often just a bigger word for ‘opportunity’. A bubble is arguably scalping writ large – it is by nature transient and risky, but to traders this just means it comes with very specific strategies and mindsets that are shorter-term in nature and keep in mind the nature of the thing they’re riding. A successful trader doesn’t buy a horse and hope it’ll win the race like an investor does, but instead uses the one that looks the fastest to get from A to B. Few things are faster than a bubble if you time it right – and isn’t that what trading is about anyway?

But is AI really a bubble? How to recognise a financial bubble:

  1. Assets' prices increases rapidly - A bubble typically starts with an asset experiencing a period of rapid price increase, which draws more and more buyers in. 
  2. Everyone is talking about it - Bubbles are often associated with media hype – everyone seems to be gabbing about the same asset and the potential return you can get from it.
  3. Experts are warning of it being overvalued - As more people flock to buy an asset, its price continues to rise beyond what can be considered fair value in proportion to its earnings or other financial parameters.
  4. Everyone is buying - The asset reaches a point where everyone seems to be buying, regardless of price or potential return on investment. This is often fuelled by financial market FOMO, as well as the perceived ‘wisdom’ that prices can only go up from here.

Some strategies for trading on bubbles

Here are some ways traders may look at speculating on the AI bubble and other investment bubble in the stock market:

  • Trend trading: the most obvious MO is to ride the momentum and then trade the fade of market sentiment’s hype
  • Short-selling: bubbles are most often identified on the come-down, and the higher they rise, the harder they tend to fall. Short-selling things like less-established stock that’s associated with that bubble, or broad-spectrum instruments exposed to it like ETFs or some indices, is another strategy to exploit there
  • Hedging using options: stock market bubbles tend to be volatile and move very much, very fast, with tons of liquidity. This makes things like options – which give you the right to let them expire – a way to hedge your positions that may be exposed to a speculative bubble
  • Breakout trading: stock prices, ETFs or commodities associated with a bubble may be poised for a true breakout – the trick would be identifying it and getting in on the action in time

Final thoughts

Experts, market enthusiasts and voices calling out in the wilderness are declaring the Chat GPT-heralded AI craze of 2023 a bubble. And that’s no bad thing – especially if you’re a trader.

In the big, crazy soup that is the financial markets, bubbles are part of the deal, they’re a natural phenomenon of a moving, thriving market as much as other elements like liquidity and volatility are.

Bubbles are also highly useful for the progression of our society, especially tech bubbles like this one. Just because something’s likely to burst doesn’t mean it doesn’t leave a lasting impact on the world – just look at the Dot Com Bubble. Are you trying to tell me that the internet didn’t change our way of life?

So, bottom line is, bubbles are not evil – they just are. You can make enormous losses, but also enormous profits, when a financial bubble arrives on the scene – as long as you recognise it for what it is, and don’t strategise or invest based on what it isn’t.

Or, as our Head of Research Chris Weston likes to say: Remember, if you want to dance in the disco, you’d better be the closest to the exit if a fire breaks out. Know your risk and know when the party is over, no matter how bubbly it is.

References:

1Financial Times, 2023

2Wired magazine, 2023

3NASDAQ, 2018

4Fierce Electronics, 2023


Related articles

The USD; a magical currency that has the wind to its back

The USD; a magical currency that has the wind to its back

USD
RBNZ U-Turn Dents The Kiwi Dollar

RBNZ U-Turn Dents The Kiwi Dollar

NZD
Playing further outperformance in US markets

Playing further outperformance in US markets

Indices

Diese Inhalte stellen keine unabhängige Finanzanalyse dar, sondern gehören zu unserer Werbemitteilung. Folglich sind die gesetzlichen und regulatorischen Bestimmungen, die sich auf unabhängige Finanzanalysen beziehen, nicht auf diese Website und unsere Kommunikation anwendbar. Diese Inhalte (unabhängig davon, ob sie Meinungen wiedergeben oder nicht) dienen nur der allgemeinen Information und berücksichtigen Ihre persönlichen Umstände oder Ziele nicht. Die Inhalte unserer Webseite und unserer Kommunikation sind nicht als Finanzberatung, Anlageberatung oder andere verlässliche Beratung gedacht und dürfen auch nicht als solche betrachtet werden. Keine auf der Website wiedergegebene Meinung stellt eine Empfehlung seitens Pepperstone oder seitens des Autors dar, nach der eine bestimmte Anlage, Transaktion oder Anlagestrategie oder ein bestimmtes Wertpapier für eine bestimmte Person geeignet wäre.

Obwohl die in dieser Werbemitteilung enthaltenen Informationen aus Quellen, welche als verlässlich betrachtet werden können, bezogen wurden, gewährleisten weder Pepperstone noch der Autor die Richtigkeit oder Vollständigkeit dieser Informationen. Alle Informationen sind nur indikativ, können ohne vorherige Mitteilung abgeändert werden und können jederzeit veraltet sein. Weder Pepperstone noch der Autor übernehmen Haftung für Verluste, welche Sie entweder direkt oder indirekt durch eine Anlageentscheidung, die Sie auf Grundlage einer auf dieser Webseite enthaltenen Informationen getroffen haben, erleiden. Diese Website kann Graphiken enthalten, die frühere Wertentwicklung eines Finanzinstruments und/oder Schätzungen und Prognosen abbilden. Informationen über die frühere Wertentwicklung eines Finanzinstruments lassen keine verlässliche Schlussfolgerung auf die zukünftige Entwicklung zu.

Andere Seiten

  • The Trade Off
  • Partner
  • Gruppe
  • Karriere

Trading-Ansätze

  • Kosten
  • Trading-Konten
  • Pro
  • Premium-Kunden
  • Active-Trader-Programm
  • Handelszeiten

Plattformen

  • Trading-Plattformen
  • Trading tools

Märkte & Symbole

  • Forex
  • Aktien
  • ETFs
  • Indizes
  • Rohstoffe
  • Währungs-Indizes
  • CFD Forwards

Analysen

  • Markt-Nachrichten
  • Wochenausblick
  • Treffen Sie unseren Analysten

Trading lernen

  • Trading Leitfaden
  • Lernvideos
  • Live-Webinare bei Pepperstone
Pepperstone logo
support@pepperstone.com
+49 (0)211 81999940
Pepperstone GmbH Neubrückstrasse 1 40213 Düsseldorf
  • Rechtsdokumentation
  • Impressum
  • Datenschutzerklärung
  • Cookie Richtlinie

© 2025 Pepperstone GmbH

Risikowarnung: CFD sind komplexe Instrumente und beinhalten wegen der Hebelwirkung ein hohes Risiko, schnell Geld zu verlieren. 75.3% der Kleinanlegerkonten verlieren Geld beim CFD-Handel mit diesem Anbieter. Sie sollten überlegen, ob Sie verstehen, wie CFD funktionieren und ob Sie es sich leisten können, das hohe Risiko einzugehen, Ihr Geld zu verlieren. 

Bei professionellen Kunden können Verluste die Einlagen übersteigen. Sie erwerben keine Rechte an Vermögensgegenständen. Die vergangene Wertentwicklung lässt keinen Rückschluss auf zukünftige Wertentwicklung zu. Die Informationen auf dieser Website haben generellen Charakter und beziehen sich nicht auf individuelle Umstände von Kunden, deren finanziellen Verhältnisse oder Bedürfnisse. Bitte beachten Sie unsere Rechtshinweise und stellen Sie sicher, dass Sie die Risiken verstanden haben, bevor Sie Handelsaktivitäten beginnen. Wir empfehlen Ihnen unabhängige Beratung in Anspruch zu nehmen. 

Der Wert von Derivaten kann sowohl steigen als auch fallen, was bedeuten könnte, dass Sie weniger zurückbekommen, als Sie ursprünglich investiert haben. Jeder Handel ist mit Risiken verbunden. 

CFD-, und Derivatekonten werden von der Pepperstone GmbH bereitgestellt. Pepperstone ist eine Referenz auf Pepperstone GmbH (ein Unternehmen mit Sitz in der Bundesrepublik Deutschland und eingetragen im Handelsregister Düsseldorf unter der Nummer HRB 91279 Neubrückstr. 1, 40213 Düsseldorf, Deutschland). Pepperstone GmbH wird von der Bundesanstalt für Finanzdienstleistungsaufsicht (Registernummer 151148) beaufsichtigt. 

Die Informationen auf dieser Webseite richten sich nicht an Einwohner der Vereinigten Staaten oder Belgiens gerichtet und sind nicht für die Weitergabe an oder die Nutzung durch eine Person in einem Land oder einer Gerichtsbarkeit bestimmt, in dem eine solche Weitergabe oder Nutzung gegen die lokalen Gesetze oder Vorschriften verstoßen würde.