Tech guru Erik Gordon uses Microsoft example to warn companies and investors on ‘Jupiter planet-like’ AI bubble

Tech expert and veteran professor, Erik Gordon, has once again warned technology companies and investors, saying that the AI bubble is as large as Jupiter planet and when it bursts, the investors will suffer. His comment comes a day after Microsoft announced its Q2 results, and its stock dropped after cloud revenues fail to exceed investor expectations.“The AI bubble is almost as big as the planet Jupiter. When it bursts, the debris will be everywhere. Big, institutional investors will be hit with it, and so will individual investors who bet the bubble would get even bigger,” Gordon, a professor at the University of Michigan’s Ross School of Business, told Business Insider.Gordon highlighted the recent performance of Microsoft as the “canary in the coal mine” for the broader tech sector. The software giant reported earnings that beat consensus on the top and bottom lines, however, moderate cloud growth saw its stock tumble more than 6%. Reports also that Microsoft failed to win investors’ trust over AI spending.“Microsoft's shares sank because of the truckloads of cash it is investing in AI," Gordon noted, adding, “That is a warning of the burst to come.”Microsoft’s financial filings reveal a 95% year-on-year surge in net cash used for investing, totaling over $57 billion in the six months ending in December. Gordon, however, does not expect an immediate crash, suggesting two primary reason due to which the market is currently in a state of “supported suspension”. He noted that institutional investors have deep pockets, enough to “prop up” current valuations. He also noted that rapid technological breakthroughs are “exciting enough to distract” from what Gordon describes as irrational valuations.‘Suffering’ will be worse than the Dot-Com crash: GordonGordon has previously warned of an “order-of-magnitude overvaluation” and now believes the when the AI bubble will burst, it will eclipse the 2000 dot-com bust. “The suffering will be more painful for investors than the aftermath of the dot-com bubble,” Gordon warned.