This year’s Nobel laureates in economics are sounding the alarm—and offering reassurance—on artificial intelligence’s explosive rise in global markets.
“Yes, it’s an AI bubble,” says Peter Howitt, one of the 2025 laureates. “Billions are being poured into AI. Much of it will be wasted.”
His warning comes amid surging valuations of tech firms, many of which now trade on promises rather than profits.
History repeats itself
Howitt sees parallels with past technological gold rushes. “We’re in a phase of elimination,” he explains. “Many AI approaches will fail. Only the best will survive.”
Yet he stresses: the technology itself is not the bubble. “AI is revolutionary—like the steam engine,” he says. “It will reshape the entire economy.”
Learning from the dot-com crash
Fellow laureate Philippe Aghion draws a direct line to the early 2000s. “The dot-com bubble burst, but it didn’t wreck the economy—because it wasn’t debt-fuelled,” he notes.
Today’s AI frenzy shares that trait. Investor exuberance is high, but leverage remains relatively contained.
Still, Aghion cautions: the true economic payoff from AI is years away. “This is a foundational technology,” he says. “Its full impact requires new business models, skills, and infrastructure.”
Jobs will change—not vanish
What about employment? Economic historian Joel Mokyr, the third laureate, dismisses dystopian forecasts. “AI won’t eliminate human work. It will reduce hours.”
He points to history: the power loom didn’t end labour—it shifted it. “A four-day workweek is within reach,” Mokyr argues. “Mass unemployment? That’s nonsense.”
A measured outlook for Nordic markets
For Nordic investors and policymakers, the message is clear: embrace AI, but stay grounded. Productivity gains will come—but unevenly and over time.
Smart regulation, workforce reskilling, and patient capital will determine who thrives when the bubble deflates.
The 2025 Sveriges Riksbank Prize in Economic Sciences was awarded jointly to Peter Howitt, Philippe Aghion, and Joel Mokyr for their pioneering work on technological change and long-term economic growth.
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