AI Boom Echoes Classic "Reflexivity" Bubble, Warns Soros Theory

A financial theory from billionaire investor George Soros may help explain the current artificial intelligence (AI) investment surge. The theory is called "reflexivity." It describes how market prices can enter self-reinforcing feedback loops. Here is how it works: Rising prices boost investor confidence. That confidence leads to more investment, which pushes prices even higher. This loop can detach prices from a company's real value. Experts suggest the AI sector shows signs of this effect. Excitement about AI's potential drives major investment in tech companies. Their rising stock prices then fuel more excitement and even more investment. This creates a powerful cycle. The theory does not predict if or when a bubble might burst. However, it provides a framework for understanding the market's dramatic rise. It highlights how psychology and market prices can constantly influence each other. For investors, the concept is a reminder to separate market hype from fundamental business value.