All eyes on markets for AI Bubble Watch: Is it a Floater or a Popper?
- Reference: 1759494192
- News link: https://www.theregister.co.uk/2025/10/03/ai_bubble_watch_markets/
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Non-believers might be interested in whether this combination of escalating asset value and burgeoning debt is anything to worry about...
To put this in perspective, [2]Toyota [PDF] sells around 10.8 million vehicles per year, accrues an operating income (profit before tax) of around $32 billion and has a market cap of a mere [3]$250 billion .
If this continues, it's not hard to imagine OpenAI might be worth double Toyota's value. Welcome to the world of the AI boom, where gravity-defying feats are possible so long as enough people believe they are.
There are certainly enough believers out there. GPU rental business CoreWeave [4]told US financial regulators [PDF] on Thursday it had added an incremental $3 billion tranche of delayed draw term loans to buy certain equipment, hardware, infrastructure, and other systems.
In August, CFO Nitin Agrawal said [5]the company had taken on a total of over $25 billion worth of debt and equity since the start of last year, all to fund the building of its AI cloud infrastructure.
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The leverage of CoreWeave is a drop in the ocean of money need to make AI believers' dreams come true. Last week, management consulting firm Bain & Company [7]predicted that funding the necessary infrastructure, would require the generation of $2 trillion in revenue by 2030.
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According to Oracle, the former application and database company, there will be plenty of buyers for that infrastructure. It says it has [10]a $455 billion spending pipeline from its AI datacenter customers. The problem is, some of them do not yet have the money. OpenAI is [11]on the hook for $300 billion of Oracle's capacity, and the definitely-now-a-cloud-AI company needs to [12]borrow at least around $100 billion over the next four years to build the datacenters required, according to KeyBanc's projections.
The fact that some of Oracle core customers don't yet have the money for all the spending against which it is borrowing huge sums has caught the eye of credit rating agency Moody's, [13]which pointed out the significant "counterparty risk" in Oracle's projected growth – the possibility that another party fails to meet its obligations.
[14]
None of this deterred investors: Oracle's share price has more than doubled since the end of April.
Non-believers might be interested in whether this combination of escalating asset value and burgeoning debt is anything to worry about.
Writing in the Financial Times this week, US financial commentator Robert Armstrong was not yet sounding the alarm, but was careful to add a note of caution. He cites an argument from Dario Perkins of economic forecaster TS Lombard: that leveraged bubbles such as property markets are far deadlier than unleveraged bubbles in stock markets, for example.
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"We hope this is right, but we are not totally confident. It is true that the big tech companies are mostly financing their AI investments out of free cash flow. At the same time, we hear a lot about private debt investment in data centres, and we have deep respect for the financial system's ability to conceal leverage in unexpected places, especially when it is in the grip of a ‘next big thing' narrative," [16]Armstrong wrote .
Last week, Barclays Equity Research published a note which kicked the tires of an AI bubble scenario. It concluded that AI as an investment theme remains on a solid footing.
Although it is "frothy," it is not a bubble yet, the bank said. "Hyperscaler capex/sales is up to 25 percent, but still well below the 40 percent for major telcos during the dotcom bubble. Leverage is also a fraction of what it was then. Opex is rising as the AI talent war heats up, but is still being outpaced by revenue growth from hyperscalers' core businesses, with AI upside down the road as adoption accelerates."
Meanwhile, IT analyst giant Gartner has maintained there is not a bubble, although there will be an extinction among AI model builders, who will be bought by bigger players, or see their market taken by surviving players. The staggering amount of revenue required to pay for the infrastructure will come piecemeal, in tiny bits from cash changing hands through the tech we all use.
"It's going to be in every TV, it's going to be in every phone. It's going to be in your car, in your toaster, and in every streaming service. Every piece of technology that you consume today will have GenAI in it," John-David Lovelock, Distinguished VP Analyst at Gartner, [17]told The Register last month.
But what are we actually doing with AI?
This week digital studio Xicoia [18]unveiled AI "actress" Tilly Norwood , much to the outrage of Hollywood's flesh and blood workforce.
[19]Oracle will have to borrow at least $25B a year to fund AI fantasy, says analyst
[20]OpenNvidia could become the AI generation's WinTel
[21]AI hype train may jump the tracks over $2T infrastructure bill, warns Bain
[22]AI in your toaster: Analyst predicts $1.5T global spend in 2025
Another example of a debatable application of AI comes from an argument over whether it should become a stand-in nanny or storyteller. The UK's Guardian newspaper [23]recounts one father using ChatGPT to answer his four-year-old's endless questions about Thomas the Tank Engine. "My son thinks ChatGPT is the coolest train-loving person in the world. The bar is set so high now I am never going to be able to compete with that," he confessed.
Hierarchical, dictatorial, and sometimes downright nasty, the world of Thomas the Tank Engine is sadly one familiar to us all. With fears of a recession already in the air, the US government is likely to enter a second week of shutdown. The question is, for how long can AI believers deny that our fate is in the fat controller's small hands? ®
Get our [24]Tech Resources
[1] https://www.theregister.com/2025/10/02/openai_ropes_in_samsung_and/
[2] https://global.toyota/pages/global_toyota/ir/financial-results/2025_4q_presentation_en.pdf
[3] https://www.marketwatch.com/investing/stock/tm
[4] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001769628/bd588af8-976b-40e2-8632-2c727d5505ad.pdf
[5] https://www.theregister.com/2025/08/13/debtladen_coreweave_continues_to_invest/
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aN_zEl9dI9tTcaz8QVrJRQAAANc&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[7] https://www.theregister.com/2025/09/24/bain_ai_costs/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aN_zEl9dI9tTcaz8QVrJRQAAANc&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aN_zEl9dI9tTcaz8QVrJRQAAANc&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2025/09/10/oracle_cloud_llm_cash/
[11] https://www.theregister.com/2025/09/11/openai_reportedly_on_the_hook/
[12] https://www.theregister.com/2025/09/29/oracle_ai_debt/
[13] https://www.theregister.com/2025/09/22/moodys_raises_questions_over_oracles/
[14] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aN_zEl9dI9tTcaz8QVrJRQAAANc&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[15] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aN_zEl9dI9tTcaz8QVrJRQAAANc&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[16] https://www.ft.com/content/603be7d5-13ac-4047-9854-24db5f0f0802
[17] https://www.theregister.com/2025/09/17/gartner_ai_spending/
[18] https://www.ft.com/content/603be7d5-13ac-4047-9854-24db5f0f0802
[19] https://www.theregister.com/2025/09/29/oracle_ai_debt/
[20] https://www.theregister.com/2025/09/29/nvidia_openai_alliance_opinion_column/
[21] https://www.theregister.com/2025/09/24/bain_ai_costs/
[22] https://www.theregister.com/2025/09/17/gartner_ai_spending/
[23] https://www.theguardian.com/technology/ng-interactive/2025/oct/02/ai-children-parenting-creativity
[24] https://whitepapers.theregister.com/
For those with the right tools, it is possible to track how often expressions referring to an investment bubble in
Is it a floater?
Yes. Anything overvaluing LLMs is a floater. Maybe not in the way the headline means*
* unless a "popper" is - nope, not going to think about that, uh uh, nope - yuck.
Re: Is it a floater?
Probably in the way the headline writer had in mind.
Re: Is it a floater?
You try to flush AI but it just won't go away.
It's like heating a pressure cooker beyond its design temperature
The longer it will take to "pop", the louder the bang will be...
The AI bubble is different in one respect from earlier economic bubbles, namely that the path companies go to try to make AI at least issue somewhat "correct" answers seems just to be: "make it bigger" for the past several years.
This leads to the need of accelerated spending across the AI supply chain (accelerators and data centers, both age fast and require short amortization time frames, lots of energy), forcing the industry into an exponential financial (and environmental) trajectory - to the "pop".
Just try to notice how often you nowadays hear the word "trillion" from companies yet to make _any_ profit trying to make the already sunk cost look reasonable.
The longer this sunk cost fallacy is maintained, the harder the crash will become.
I'd be surprised, if there would not be a major correction before Q2/2026.
Ladies and Gentlemen, fasten your seat belts, please.
Re: It's like heating a pressure cooker beyond its design temperature
It's getting to the scale of worrying what it takes with it. Is Oracle too big to fail? Or Microsoft? The H/W manufacturers should probably be OK if their credit control stays in control.
dot com crash
reminds me of the dot.com or dot bomb bubble in the early 2000's, all went crazy with over-evaluations of companies. I was working for an online news company which started with 4M VC in 1998 and it went to a valuation of 200m with no revenue, companies just going to get online to get higher stock valuations from the market makers etc. What happened in the crash was probably more of a correction than a crash but it did mean alot of the free stuff started to become subscription services. There were lots of free cloud drives around and this all changed to tiered charging.
High interest rates at the time and less VC available also didn't help with the crash.
We might see the same with AI subscriptions going much higher from the ones that manage to survive. ?
Re: dot com crash
> We might see the same with AI subscriptions going much higher from the ones that manage to survive. ?
Surviving AI will (need to) be much more expensive. At the current rates, the AI operators lose money on each customer.
So AI will become expensive - maybe too expensive to replace all the jobs it currently promises (or threatens, depending on your wealth) to take over.
Carefully worded
" we have deep respect for the financial system's ability to conceal leverage in unexpected places, especially when it is in the grip of a ‘next big thing' narrative"
"Respect". In the same way that a punk pointing a gun at you demands that you "respect" him.
Let's unpick this drivel:
"It's going to be in every TV."
Yeah, OK, I can see how *GEN*Ai might be helpful to suggest what I watch next, but we already have that. Hardly cutting edge. Now how about it Generates a new episode of something I really like, on the fly - now that *WOULD* be a cool addition.
"It's going to be in every phone. "
Why do I need *GEN*Ai in a phone? My current fruity phone already indexes my photos to allow me to search for *that* cool pic of the dog last year. We are already at peak Ai in the hand set No?
"It's going to be in your car."
Really? GenAi in the car? - It looks like you are on a twisty road, other cars that were on twisty roads had to stop suddenly for deer, I'll slow down... Oh, wait, that's not working because I'm in the highlands with no 4g... back to hand steering the car for me.
In your toaster.
100,000 others liked their toast do a bit darker than your old setting of 3.4 out of 5, so I have burnt your toast.
"And in every streaming service."
As above for TV, I already get suggestions.
"Every piece of technology "
Just because it has a CPU, it doesn't need GenAi.
"...that you consume today will have GenAI in it," John-David Lovelock, Distinguished VP Analyst at Gartner, told The Register last month."
...
...
...
We're doomed.
just makes the pop bigger
Because if "AI" is in every phone, car, fridge blah blah blah, it just means people like me will not be buying any of those things. So in addition to the pop from AI going bust, add the revenue lost from all the consumer paperweights built that have the builtin cancer. So even the car co's, phone makers, appliance makers are going to see a hit from building product people don't want.
"Distinguished VP Analyst "
So that's what team leaders get called at Gartner these days.
Next year it'll be Distinguished VP Analyst and Demi-God. The year after Distinguished VP Analyst, Omniscient, and Demi-God. By 2030 his job title will be on a superlative laden extra long fold out business card, maybe even ranking up to a whole God.
"We're doomed."
Those betting on that stuff are doomed.
If the fallout from these things ever fell directly on a majority of the ones responsible they wouldn't happen. Ain't it all a bleedin' shame?
Tulips. Railway mania. Sub Prime mortgages. Dot com 2.0 etc.
Someone needs to work out the consequences when the bubble pops, AI goes TU, and this becomes an extinction event for those who were all in on it.
AI has no ROI and is a major security risk. In use, it is generally unreliable, needs as much human oversight as a 2 year old toddler, and is consequently no great benefit in the workplace.
Trump is squeezing investment out of his allies ($500bn from Japan) which would outsource much of the damage to other countries, if they pay up/underwrite investments before it goes pop.
The capitalist economy is not based upon people being forced to pay for things they don't want and have no use for. And there are enough of us pointing out that the emperor has no clothes on.
Some aspects of AI will find niche use amongst the wreckage, but a hypothetical crash model would be an interesting read.
Modern bubbles - markets rigged to succeed for some people?
People sitting atop bubbles with a parachute to hand descend unscathed from market-crashes.
Referred to are operators clustering within market centres such as Wall Street and the City of London. Some have secure incomes from acting as middlemen between buyers and sellers of stock. These have incentive to talk-up values when their transaction fees are percentage based. Others working under fixed fees benefit too by encouraging a frenzy of buying.
Financiers sitting on piles of a stock with a view to a huge capital gain do bear some risk, but it needs only be minor. When holding stocks which have doubled or tripled in nominal value, they may anticipate a small paper loss at the outset of a bursting bubble or broader market crash. Unlike most private investors and managers of small pension funds, operators at a financial nexus benefit from three things.
First , active participation in the flow of information concerning 'insider' knowledge. These people recognise tremors indicative of seismic shock to come.
Second , algorithmic trading enables rapid pre-prepared responses to tremors. Physical location close to a trading centre/exchange offers an edge over location further away; a simple consequence of transmission times along cables. Better yet, to have a direct connection to an exchange to cutout circuitous routes via ISPs.
Third , exclusion of almost all private investors and their advisors from timely public information about stock prices. Without subscription to an exchange, information flow is deliberately retarded by fifteen minutes in the UK and similarly elsewhere.
Thereby, markets are rigged. Big players respond immediately to tremors. If prices have gone down, but settled, they can buy back-in advantageously. Should a bubble be bursting, they will bear some loss on the previous notional value of their stock, but they will have factored that in as something to anticipate and to weather.
Few people raise complaint about the two obviously remediable blights of algorithmic trading and imposed delays on information passage to 'outsiders'. Each is a preventable scandal . Computer assisted trading is here to stay; however, it should have built-in, unavoidable, delays emulating those when trading intermediaries thronged exchange trading floors. Delays reduce the risk of out of control feedback loops occurring as algorithm speaks unto algorithm. Analogously, social media platforms such as Twatter would be much less prone to inane 'viral' episodes if the mechanism of making responses contained unavoidable delays. As an aside, it's more likely that social media operators would offer subscription payers shorter delays so that their responses gain immediate prominence.
The advent of the Internet makes it inexcusable for exchanges to delay output of the activities for most people. Privately owned, exchanges may be, but they are public resources. Real time information can be entered onto the Internet at negligible cost.
Unfortunately, banking and finance, especially since "deregulation" are laws unto themselves (as indeed is the City of London literally ). Of course, the true underlying rot - fractional reserve banking - spans centuries.
If/when AI mania collapses, one may be sure of 'little people', via private investment or through pension funds, bearing the consequences.
"not yet sounding the alarm, but was careful to add a note of caution."
Such financial commentators are probably realising they're treading a tightrope.by now. An over-strong remark could start the whole thing collapsing and they won't want to be named as the one responsible. On the other hand they could risk getting sued with recommending something they should have known was going to collapse causing some punter to get burnt.