Billionaire and DoubleLine Capital CEO Jeffrey Gundlach warns that the AI mania is a frenzy that has already happened twice in history.
In a new CNBC interview, the billionaire says investors tend to discount transformative technologies early, driving valuations to levels that later struggle to justify themselves once growth normalizes.
He recalls a similar event that happened over 100 years ago, when humanity adopted electricity en masse.
“And I use the analogy of electricity. In 1900, people started to realize that electricity was going to change the world. And they were right. And so, there was a mania in electricity stocks that actually peaked out in 1911, before there was really widespread electrification. It was all priced in. And, in fact, since 1911, if you look at U.S. stocks, everything other than electricity-oriented stocks, and then you just look at electricity stocks, the non-electricity has outperformed since 1911. So it gets priced in very, very early.”
Gundlach says a similar pattern is happening in the AI trade: “enormous” infrastructure build, real long-term impact, and a market that moves faster than fundamentals.
“But it seems a lot like kind of the fiber optic stuff back in the late 1990s, where it’s very real, it’s happening, it’s going to be world changing, but the markets are incredibly efficient at pricing things in and often overdo it.
So I am not a momentum person at all, unless there’s a fundamental reason, and momentum driving things, very high valuations, that’s just, I don’t, if there’s one thing that makes me not sleep at night is owning stuff like that, and that’s just me.”
The billionaire warns latecomers chasing AI gains will likely be disappointed
“For some people, they’ll make a fortune on it, but I think the fortunes have largely been made.”