Shiller P/E: AI market second-priciest in history

The article frames the AI boom as the latest in a long line of game-changing technologies — the internet among them — that consistently draw investors who overestimate how fast adoption and optimization will pay off, and it notes that internet-driven businesses did not truly mature until several years after the dot-com bubble burst. It applies the same lens to the current data-center build-out: spending is so heavy that adoption is not the problem, but it will likely take years before businesses understand how to optimize AI solutions to maximize sales and profits.

The inflation angle connects the build-out to monetary policy. The article points to President Donald Trump's tariffs and the Iran war driving up consumer prices, and to the FOMC having labeled the AI infrastructure build-out as inflationary. Strong demand for AI hardware and persistent supply shortages are lifting the pricing power of AI-based businesses, but the article notes that higher prices are working their way down the chain to consumers, which raises the prospect of the FOMC raising interest rates.

What the outcome hinges on is whether these pressures stay entrenched enough to reset growth and valuation expectations for a build-out financed in part by debt — and, for investors, whether the historical pattern of Shiller P/E readings above 30 holding true this time looks likely or not.