The current AI boom fits right into this cycle of investor psychology:
- We're likely somewhere between Exuberance and Euphoria. AI is generating immense hype, with many believing it's a revolutionary technology that will transform everything. This leads to inflated expectations and potentially overvalued investments.
- Denial and Anxiety are around the corner. As with all emerging technologies, AI will face challenges and setbacks. Some projects will fail, and the initial hype may fade. This is when investors start to doubt and worry.
- The Fear, Despair, and Panic stages could follow. If AI fails to meet the lofty expectations, a sharp correction could occur. Investors might panic and sell off their AI-related holdings, driving prices down further.
- This cycle can repeat. Even if AI fulfills its potential, the market will likely experience boom-and-bust cycles as new developments and challenges emerge.
The key takeaway: While AI holds immense promise, it's crucial to approach investments with a level head and avoid getting caught up in the hype. Don't let FOMO (fear of missing out) drive your decisions. Do your research, diversify your portfolio, and be prepared for volatility.
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