Investor Lauren Taylor Wolf says we’re ‘absolutely’ in an AI bubble now

Lauren Taylor Wolff, co-founder of activist investment firm Impactive Capital, said all signs of increased excitement around artificial intelligence are in the form of a bubble.

“We’re completely in an AI bubble right now. It’s going to burst,” she told CNBC’s “Squawk in the street“It’s Tuesday David Faber. “I don’t know when, I don’t know the order of magnitude. A lot of people are going to lose money.”

Her comments come as excitement over AI further boosts markets, with investors betting the technology will transform industries and boost corporate earnings. Taylor Wolf said investors are underestimating the risks associated with increased AI-related spending by big tech companies.

“Relative to the hundreds of billions of dollars in free cash flow generated by Mag 7, trillions of dollars are set aside to spend,” she said, referring to the group of large-cap tech stocks that dominate the S&P 500.

Her statement has come at a time when Analysis shows The S&P 500 has become an AI index.

Taylor Wolf believes that the mismatch between capital costs and profit potential makes it difficult to justify current valuations.

“Show me the trillions of dollars in profits that will be generated in the next five years,” she said. “And you can’t. The math doesn’t work.”

She said the current environment is reminiscent of the late 1990s, when investors chased anything Internet-related regardless of valuation or business model. During the dotcom era, there was little to no shortage of bubble companies; She said she wanted to see where no one else was looking.

“You would have been better off buying Cisco in 2000 at 35 times earnings.

At 13D Monitor’s Active-Passive Investor Summit on Tuesday, Taylor Wolf presents her new idea Advanced drainage system, Which she called the undisputed leader in plastic stormwater and residential septic systems. She said the company is AI proof.