I am Certainty Uncertain About an AI Bubble

Today’s elevated equity valuations may look like a classic bubble, but they are hard to understand without accounting for extreme uncertainty about AI-driven growth. Because valuation is convex in growth, large upside uncertainty can rationally sustain very high P/E ratios even when average growth effects are modest. In this sense, AI uncertainty may be “good” uncertainty—one that boosts prices without proportionally increasing systemic downside risk.