AI boom has years to run before bubble risks bite, CIO says
Federated Hermes CIO Steve Chiavarone says the AI infrastructure build-out has years to run before bubble risks become the bigger concern.
AI investment is still running on infrastructure, not just hype, according to Federated Hermes chief investment officer Steve Chiavarone. In a Bloomberg Technology report, Chiavarone argues that investors who see a bubble forming may be early by several years because the build-out behind artificial intelligence still has room to run.1
That is a more specific argument than the usual “AI is either a bubble or it is not” debate. Chiavarone says markets are already separating companies that can attract capital from those that cannot, and that funding is not being handed out indiscriminately at the cheapest possible rates.1 In his view, that selectivity looks unlike the classic late-stage bubble pattern.
What the argument means
The distinction matters because AI spending is not only a bet on software valuations. It is also a bet on the physical systems underneath them: data centres, advanced chips, networking, power and the services needed to keep those systems running. If those investments continue, companies supplying that infrastructure could keep benefiting even while investors become more cautious about individual AI products.
It does not remove the risk. A long build-out can still create overcapacity, expensive projects or companies whose earnings fail to justify the money flowing into them. Chiavarone’s point is about timing and market selectivity, not a guarantee that every AI-linked business will succeed.1
Our opinion
The useful part of this forecast is its refusal to treat “AI” as a single trade. Infrastructure demand can remain real while some valuations become detached from results. That is why the next phase of the boom should be judged by delivered capacity, revenue quality and power economics rather than by the size of a company’s AI label. The warning is still worth keeping in view: being early does not mean being wrong, but it also does not make a risky investment safe.
The hero image is an abstract digital-circuit photograph by Pachon in Motion on Pexels.2