Exclusive | Nobel Laureate Robert Engle Dismisses Fears of AI Investment Bubble

As tech titans from OpenAI's Sam Altman to Microsoft founder Bill Gates warn of overheating in the artificial intelligence sector, Nobel Prize-winning economist Robert Engle offered a contrarian assessment during a recent visit to Taiwan: The AI boom is built on solid ground, not thin air.

“We had a bubble in the internet around 2000, we call that the dot-com bubble. And there were many companies that hadn't even started yet, that had all this capital, they didn't know what they were gonna do with it, and they went bankrupt,” Engle said in an exclusive interview withStorm Media.

“I think [the AI investment boom] is different. I don't mean that AI is not gonna go down, that some of these investments are not gonna retract. But I don't think they're going to collapse the same way other bubbles have done.”

Engle, 83, is a professor emeritus at New York University's Stern School of Business and a pioneer in financial risk assessment. He was in Taiwan as part of the “Taiwan Bridge Program,” a collaboration between local universities and the International Peace Foundation. （Related： Taiwan’s Constitutional Court Legitimacy Put at Risk by Contentious Health Penalty Ruling ｜ Latest ）

His dismissal of bubble fears carries significant weight.Engle won the 2003 Nobel Memorial Prize in Economic Sciences for developing the ARCH (Autoregressive Conditional Heteroskedasticity) model, a statistical method that became the industry standard for analyzing volatility in financial markets.

Defining a Bubble

Engle defines a bubble not by high valuations, but by the decoupling of price from utility.

“A bubble is where you invest in something not because you think it has value, but because you think somebody else is gonna buy it from you at a higher price later,” he said.

“A bubble doesn't really have an economic value by itself.”

He pointed to the 2008 U.S. housing crisis and China's recent real estate collapse as classic examples of speculative frenzies where assets were purchased solely for resale. The current AI landscape, however, looks different to the seasoned economist.

"The AI companies have products that have value, that are being used,” Engle said, noting that giants like Microsoft, Amazon, and Meta are channeling enormous revenue streams into profitable ventures.

“If I wanted to start an AI company without a specific plan... but planning to fundraise to see if I could raise capital—if I could raise huge sums based solely on my name, that would be a bubble,” he added. While private markets show signs of froth, Engle argues the foundational public companies driving the sector are fundamentally sound. （Related： Taiwan’s Constitutional Court Legitimacy Put at Risk by Contentious Health Penalty Ruling ｜ Latest ）

From the Lab to Wall Street

Engle's path to economic stardom was unconventional. A figure skating enthusiast who still hits the ice regularly at 83, he began his academic career in the basement of Cornell University's physics building, conducting superconductivity experiments.

“I realized that if I was really successful in physics, there would be ten people in the world that could understand what I did,” Engle recalled.

“And that wasn't enough... Economics was the most mathematical of the social sciences, so I gravitated toward economics.”

This pivot led him to the burgeoning field of econometrics in the 1980s, where his work on volatility models attracted the attention of Wall Street firms like Salomon Brothers, then a hotbed of financial innovation.

Climate Risk and the "Free Rider" Problem

In recent years, Engle has shifted his focus from market volatility to climate change, specifically analyzing "termination risk"—the probability that companies may collapse due to policy shifts or environmental changes.

Regarding the return of Donald Trump to the U.S. presidency, Engle was blunt. He characterized Trump's pro-fossil fuel agenda as “is in exactly the wrong direction,” warning that eliminating climate regulations makes the U.S. a free rider on the global stage—benefiting from other nations' emission reductions while contributing none of its own.

However, Engle remains an optimist. He argues that economic forces will ultimately override political hurdles.

​He said he believes renewable energy will become the primary energy source for the future, citing three factors: the falling cost of renewables; the profitability of green technology; and the massive electricity demands of the AI revolution, which can only be met quickly and cheaply through solar and wind power. （Related： Taiwan’s Constitutional Court Legitimacy Put at Risk by Contentious Health Penalty Ruling ｜ Latest ）

Original Article in Chinese