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Stocks have surged to record highs as investors appear to be discounting major risks, according to Erik Gordon, an entrepreneurship professor at the University of Michigan’s Ross School of Business.
Gordon told Business Insider that the market is “shrugging off” war in the Middle East, inflation, wild oil prices, and tens of thousands of job cuts. He said investors have effectively “fabricated its own universe” in which the only companies that matter are those with “AI” in their names.
Gordon argued that companies can attract investment by presenting themselves as AI businesses, even if they are otherwise facing pressure. He cited Allbirds as an example.
Allbirds recently announced a pivot to supplying AI infrastructure under the name NewBird AI, and the company’s stock price rose nearly 600% in a single day, according to Gordon.
He said this dynamic reflects what he called the “2026 PT Barnum Award,” referencing the showman known for publicity stunts and hoaxes. Gordon added that the effect can be amplified when companies claim AI status despite being behind “real AI companies” that have advanced technology and “billions to spend” to stay competitive.
Gordon pointed to broader market strength despite worsening macroeconomic conditions. He said the S&P 500 has surged more than 10% to all-time highs this month.
That rally has occurred even as the US-Iran war disrupts international trade and energy flows, oil prices have reached four-year highs, and global economic growth faces pressure alongside renewed inflation risks.
He also noted that tech companies have laid off tens of thousands of employees. While some employees have attributed job cuts to AI enabling leaner operations, Gordon said escalating job losses could squeeze household budgets, curb consumer spending, and pinch corporate profits.
Gordon is not alone in questioning the AI-driven stock surge. Michael Burry, known for “The Big Short,” has warned that Big Tech companies are seeing slower growth, overinvesting in AI equipment, inflating earnings, diluting shareholders, and signing circular contracts with one another to sustain the hype, according to his Substack.
Jeremy Grantham, cofounder of investment firm GMO, has said AI is “obviously a bubble” and will burst sooner or later. Gordon previously described the “AI bubble” as being as large as the planet Jupiter and said “debris will be everywhere” once it bursts.
In August, Gordon also warned about an “order-of-magnitude overvaluation bubble,” arguing that broader stock ownership and steeper valuations mean that when it pops, “more investors will suffer than suffered in the dot-com crash,” and that the pain would be more severe.
Other investors, including Ross Gerber and Kevin O’Leary, have said they are not worried about a bubble, arguing that AI is producing measurable gains in productivity and supporting rapid growth in revenues and profits at companies such as Nvidia.
Whether Gordon is right that the stock market is disconnected from reality—or whether investors are correctly pricing in large future returns from AI—will become clearer over time, the article said.
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