Federal Reserve Chair Says AI Isn't a Bubble, But the Reality Is More Complex

The article explores the debate around whether the AI industry is in a bubble or experiencing genuine transformation. While Federal Reserve Chair Jerome Powell claims AI spending is not bubble-like, the reality is more nuanced.

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The article discusses the debate around whether the AI industry is in a bubble or experiencing genuine transformation. While Federal Reserve Chair Jerome Powell claims AI spending is not bubble-like because companies 'actually have earnings', the reality is more complex. The financial metrics surrounding AI investment paint a picture of both genuine growth and speculative excess. While some AI companies, particularly cloud providers and chip manufacturers like NVIDIA, are showing strong earnings, over 50% of VC funding in Q2 2025 went to AI companies, often at unprecedented valuations with unproven revenue models. The boom appears concentrated in a small fraction of companies, creating a 'boom for some, bubble for others' scenario. However, the article notes that unlike the dot-com bubble, today's AI investments show more diversified revenue streams across infrastructure, chips, services, and applications. Additionally, AI companies represent a significant portion of S&P 500 returns, earnings growth, and capital spending growth, suggesting real economic transformation rather than pure speculation.