Raoul Pal: Stock market faces 'spectacular bubble'

Raoul Pal speaks out about a fundamental problem of the stock market: if artificial intelligence can build free software platforms, what is a listed software company still worth? This question goes to the heart of how capital markets work today, where technology companies represent a large part of the value.

In brief:

• Raoul Pal argues that artificial intelligence can set up and shut down companies in minutes without traditional overhead
• He expects one more classic market cycle first: a “spectacular bubble” before the system collapses
• Institutional investors are not yet fully invested in technology, a sign that the biggest rise is still to come

AI fundamentally changes the meaning of ‘company’

According to Pal, artificial intelligence can not only copy companies, but also perform better than the original. An AI agent can start up a Software as a Service platform, profit from it and shut it down, all without hiring employees, setting up registrations or winding them down. This transforms what a company actually means: in his view, it becomes mainly an arbitrage trade.

Pal calls this phenomenon the “economic singularity”: technology that advances faster than the old social infrastructure can process. It calls into question existing financial structures such as venture capital, equities and hedge funds. “None of them is fit for this purpose,” Pal said.

The biggest rally ever is still to come first

But before that future, Pal sees one more classic market cycle: the “blowoff top”, or the spectacular bubble before everything collapses. The interesting thing is that it has not yet begun, because investors are not yet fully convinced. Institutional parties were still underweight in technology last year. The debt build-up typical of major bubbles is still largely absent.

Traditional bubbles do not reach their peak on cynicism, but on euphoria. Pal therefore sees room for a spectacular rally, in which more capital flows into technology before the fundamental questions about valuation and sustainability can no longer be ignored.