• White House economic adviser Kevin Hassett dismisses fears of a market bubble, citing AI-driven productivity gains.
  • Hassett argues that AI is a transformative technology justifying elevated valuations, contrasting with past speculative bubbles.
  • The remarks come amid ongoing debate about potential overvaluation in tech stocks.

AI as a Structural Shift

White House Council of Economic Advisers Chairman Kevin Hassett pushed back against concerns that stock markets are in bubble territory, arguing that the artificial intelligence boom represents a fundamental shift in the economy rather than speculative excess. "I don't see markets in bubble territory due to AI," Hassett said in an interview on Friday. "What we're witnessing is a genuine productivity revolution that is still in its early stages."

Hassett's comments come as the S&P 500 hovers near record highs, driven largely by tech giants heavily invested in AI. The Nasdaq Composite has surged over 30% in the past year, fueled by companies like Nvidia and Microsoft.

Contrasting with the Dot-Com Era

The top economist drew a sharp distinction between current market dynamics and the late-1990s dot-com bubble. "Back then, many companies had no earnings and unsustainable business models," he noted. "Today's AI leaders have real revenues, strong balance sheets, and are deploying capital in ways that enhance productivity across industries."

Hassett pointed to recent corporate earnings reports showing AI-related cost savings and revenue growth. A study by McKinsey estimated AI could contribute up to $4.4 trillion annually to the global economy.

Skepticism Remains

Not all are convinced. Some analysts warn that valuations are stretched, with the S&P 500's price-to-earnings ratio above 25, well above historical averages. "While AI is transformative, expectations may be pricing in perfection," said a portfolio manager who declined to be named.

When asked about potential risks, Hassett acknowledged that "any new technology has hype cycles," but maintained that the fundamentals are solid. The administration is working to ensure regulatory frameworks keep pace without stifling innovation, he added.

Overall, Hassett's defense of AI's role in markets underscores the White House's optimistic growth narrative as the 2024 election approaches.

Correction: A previous version of this article misstated Hassett's title. He is the Chairman of the White House Council of Economic Advisers, not the National Economic Council.