AI in Practice: Is This a Bubble or a Beginning?

Every new technology cycle raises the same question: Are we witnessing a transformational shift—or a speculative bubble?

AI-related stocks have surged, capital spending is accelerating, and headlines often seem to alternate between promises of a revolution and warnings of excess.

We sat down with Jim Caron, CIO of the Portfolio Solutions Group and Schuyler Hooper, Executive Director, Portfolio Solutions Group to explore a question investors continue to ask: Are we in an AI bubble?

David Richman: Let's start with the question everyone is asking. Are we in an AI bubble?

Jim Caron:
I think it's the wrong question.

When people talk about bubbles, they're usually focused on stock prices. I'm more interested in fundamentals. The real question is whether AI can create enough productivity and profitability improvements to justify the investment we're seeing today.

My view is that we're still very early in that process.

Most companies are talking about AI. Many are experimenting. Far fewer have actually integrated it into the core of their operations in a way that materially impacts earnings.

That's important because we're already seeing meaningful productivity gains. The next step is converting those gains into profitability. I think that's where the market may be underestimating the opportunity.

Schuyler Hooper:
I agree.

If you look across corporate America today, we're seeing the first inning of adoption rather than the final inning.

A lot of investors assume that because AI has become ubiquitous in conversation, the investment opportunity must already be fully reflected in markets, yet widespread discussion and widespread implementation are two very different things.

The reality is that many organizations are still figuring out governance, data management, security frameworks, and workflow integration. Once those pieces are in place, we could see an acceleration in productivity gains that the market isn't fully appreciating today.

David: Historically, technological revolutions have often been associated with labor disruption. Is that what you see happening with AI?

Jim:
Not necessarily.

People often assume the AI story is primarily about replacing workers. I think it's more accurate to think about augmenting workers.

The biggest benefit today isn't fewer employees. It's enabling employees to do more.

When a professional can complete a task in one hour that previously took five, that's a significant productivity gain. Companies can use that gain to increase output, improve service, develop new products, or expand into adjacent opportunities.

That's where profitability begins to emerge.

Eventually, as agentic AI systems become more sophisticated, there may be workforce implications in certain functions. But I think the bigger story is productivity enhancement.

Schuyler:
That's exactly how I'm thinking about it.

Personally, AI allows me to investigate more ideas, evaluate more opportunities, and move much faster than I could otherwise. The immediate benefit isn't that I'm doing less work—it's that I'm accomplishing more.

The same dynamic applies to businesses.

Over time, agentic AI may reduce the manpower required for certain repetitive processes. But before we get there, we'll likely see a substantial increase in what existing teams can accomplish.

That productivity boost is what could ultimately drive a much larger profitability cycle than many investors currently expect.

David: You both keep mentioning "agentic AI." Why is that such an important concept?

Schuyler:
Because it's the evolution from AI as a tool to AI as a teammate.

Today, most people interact with AI through prompts. Agentic AI goes further. It can perform a sequence of tasks, make decisions within predefined guardrails, and execute workflows with minimal human intervention.

Think about procurement, customer service, research, compliance processes, or network management. These are areas where agentic systems could dramatically reduce friction and increase efficiency.

The implications for corporate profitability are potentially enormous.

Jim:
And importantly, large organizations are already building the governance structures needed to make this happen responsibly.

The technology is advancing quickly. Governance, oversight, and controls have to advance alongside it.

Once those frameworks mature, adoption can move much faster. That's why I think we're still closer to the beginning than the end of this story.

David: Let's talk about the investment thesis. If you had to summarize your current view in one sentence, what would it be?

Jim:
I'd say this:

The market is focused on AI spending today; the bigger story is the profitability wave that spending may create tomorrow.

Schuyler:
My version would be:

Corporate adoption of agentic AI is likely to drive profitability improvements far faster than most expectations currently reflect.

David: So if you're not calling this an AI bubble, what are you calling it?

Jim:
I'd call it a transition.

We're moving from the infrastructure build-out phase into the productivity realization phase.

Historically, the biggest economic benefits of transformative technologies don't appear immediately. They emerge when businesses fully integrate them into everyday operations.

I think that's the stage we're approaching.

Schuyler:
And that's why I believe we're still scratching the surface.

The market has spent a lot of time measuring investment in AI. The next chapter will be measuring returns.

The benefits are there for the early adopters who use this new technology to drive higher efficiencies that lead to higher EPS and productivity.

Bottom Line:
The bubble debate assumes investors must choose between hype and reality. Jim Caron and Schuyler Hooper see a different possibility: that the market is witnessing the early stages of a productivity revolution whose full profitability impact is likely coming faster than the market realizes.

AI in Practice
AI in Practice is a new Advisor Institute program dedicated to helping financial advisors navigate and capitalize on the rapid rise of artificial intelligence from both an investment and practice management perspective.