AI coins bubble deflates as Google search interest peaks

The market for AI coins, such as Fetch.ai (FET), Render (RNDR), Bittensor (TAO), and The Graph (GRT), appears to be experiencing a significant downturn. Some tokens lost up to 30% of their value in just one week, according to Coingecko data.

This decline coincides with a peak in Google search interest for the term “AI,” as indicated by Google Trends. The search query reached a value of 100 last week, the highest level observed in the past five years.

Is the crypto AI peak behind us?

A score of 100 represents the maximum number of searches for a given query within a specific time frame. Such a number suggests that the excitement surrounding AI has reached mainstream audiences at that time.

Interestingly, this phenomenon aligns with Warren Buffet’s famous investment mantra of buying in doom and selling in boom. Historically, spikes in crypto-related Google search queries have often occurred at major market tops, indicating that retail investors tend to enter the market at its peak and exit during a bear market.

The AI rally, which began after the launch of ChatGPT in late 2022, has also benefited Nasdaq-listed chipmaker Nvidia (NVDA), considered a bellwether for the AI industry. The firm is also betting on growth beyond the current paradigm and recently confirmed it will accelerate quantum computing operations in different worldwide locations.

A word of caution

Jeremy Grantham, Chief Investment Strategist at GMO, warns that the AI rally could represent a potential bubble within a bubble, which may soon deflate. The report reads:

Remember, if margins and multiples are both at record levels at the same time, it really is double counting and double jeopardy – for waiting somewhere in the future is another July 1982 or March 2009 with simultaneous record low multiples and badly depressed margins.

As retail investors often make emotionally driven decisions and are frequently the last to enter and exit market trends, the peak in Google search interest for AI serves as a cautionary signal for those considering investing in AI-related cryptocurrencies. While the technology itself holds immense promise, the current market hype is likely not sustainable, and investors should approach such opportunities with significant caution.

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