Amazon founder Jeff Bezos said artificial intelligence is caught in an “industrial bubble” — but insists it’s the kind of bubble that will ultimately benefit the world.

Speaking at Italian Tech Week in Turin on Friday, Bezos said the frenzy has all the classic signs of a bubble: stock prices and valuations disconnected from fundamentals, investors throwing money at every idea, and an atmosphere where it’s nearly impossible to distinguish between promising ventures and doomed ones.

“This is a kind of industrial bubble,” he told the audience.

“Investors have a hard time in the middle of this excitement, distinguishing between the good ideas and the bad ideas. And that’s also probably happening today.”

He recalled how Amazon’s own stock collapsed during the dot-com crash, falling from $113 a share to $6 even as its fundamentals were improving.

“Employees were nervous, like all of our employees’ parents were calling them and saying, ‘Are you okay?’ But every single business metric was getting better,” Bezos said. “That’s the hallmark of a bubble — the stock prices can be completely disconnected from the fundamentals of the business.”

Bezos pointed to small companies with only a handful of employees attracting huge funding, a “very unusual” dynamic he said underscores just how overheated the market has become.

Why Bezos thinks bubbles can be good

Still, he said the speculative frenzy doesn’t undermine the underlying promise of the technology.

“AI is real, and it is going to change every industry,” he said. “The benefits to society from AI are going to be gigantic.”

The billionaire also suggested that bubbles can be productive in the long run.

He compared the present wave of AI investments to the biotech boom of the 1990s, when a surge of capital led many firms to collapse but also produced life-saving drugs.

“The [bubbles] that are industrial are not nearly as bad,” Bezos said. “It can even be good, because when the dust settles and you see who are the winners. Societies benefit from those inventions.”

Bezos is hardly alone in warning that the AI industry looks overheated.

OpenAI CEO Sam Altman, Alibaba cofounder Joe Tsai, hedge fund founder Ray Dalio, and C3.ai CEO Thomas Siebel have all said the market is already in bubble territory, while Goldman Sachs CEO David Solomon used the same conference in Turin to caution that stock valuations driven by AI enthusiasm will eventually face a “reset.”

For Bezos, though, the excitement around AI echoes past manias. But he urged entrepreneurs and investors to focus on enduring principles.

Reality is “completely undefeated,” he said.