Ben Inker of GMO joins Excess Returns to break down whether the AI boom is an investment bubble, how it compares to 2000, 2007 and 2021, and why today’s risk may be more about earnings than valuations. We also discuss AI capital spending, market supply from IPOs, GMO’s seven-year asset class forecasts, international stocks, benchmark-free allocation and what private equity investors may be missing.

7 YEAR ASSET CLASS FORECASThttps://www.gmo.com/americas/research-library/gmo-7-year-asset-class-forecast-may-2026_gmo7yearassetclassforecast/

WHAT BARBARIANS LIKE TO TAKE PRIVATEhttps://www.gmo.com/americas/research-library/part-1-what-barbarians-like-to-take-private_gmoquarterlyletter/

THE CASE FOR LIQUID ALTERNATIVEShttps://www.gmo.com/americas/research-library/the-case-for-liquid-alternatives-in-todays-environment_insights/

Main topics covered

• Why GMO sees the AI boom as a bubble investors may be able to navigate

• The difference between easy bubbles and hard bubbles in portfolio construction

• Lessons from the internet bubble, the global financial crisis and the 2021 duration bubble

• Why today’s market may be an earnings bubble, not just a valuation bubble

• How AI data center spending affects corporate profits before depreciation shows up

• Why transformational technologies do not always reward the companies building them

• The risk of circular financing, debt-funded AI spending and increasingly creative deal structures

• How IPOs, share issuance and market supply can pressure stock returns

• GMO’s seven-year asset class forecasts and why international stocks look more attractive than U.S. stocks

• Why private equity portfolios may contain large hidden bets on small, lower-quality companies

Timestamps

00:00 AI, earnings bubbles and market supply
00:58 Why Ben Inker thinks the AI bubble may be easier to navigate
02:43 What makes a bubble easy or hard for investors
08:12 Comparing risk and return in 2000, 2007, 2021 and today
14:42 Why optimizers and real clients see risk differently
17:02 What GMO learned from managing through past bubbles
19:08 How today compares to the 2000 internet bubble
20:00 Why this may be an earnings bubble
23:34 Semiconductors, memory makers and the capital cycle
25:00 How AI CapEx compares to railroads, electricity and fiber optics
29:33 Debt, circular financing and strange AI deals
34:32 Why massive stock issuance could challenge the market
40:00 How GMO builds seven-year asset class return forecasts
41:40 Why interest rates change fair value for stocks and bonds
45:32 Why international, value and small-cap stocks look more attractive
49:06 The case for a benchmark-free portfolio
55:21 What 700 leveraged buyouts reveal about private equity
01:02:00 How public portfolios can offset private equity risks
01:03:37 Why investors need to understand what they are paid for
01:08:27 Closing thoughts