What Would Happen If an AI Bubble Burst? (msn.com)
- Reference: 0179649854
- News link: https://news.slashdot.org/story/25/10/04/0648215/what-would-happen-if-an-ai-bubble-burst
- Source link: https://www.msn.com/en-us/money/markets/one-force-is-propping-up-the-economy-fears-are-growing-it-won-t-last/ar-AA1NAuUx
"Last week, the United States reported that the [2]economy expanded at a rate of 1.6 percent in the first half of the year, with most of that growth driven by AI spending. Without AI investment, growth would have been at about a third of that rate, according to data from the Bureau of Economic Analysis."
> The huge economic influence of AI spending illustrates how Silicon Valley is placing a bet of unprecedented scale that the technology will revolutionize every aspect of life and work. Its sway suggests there will be economic damage far beyond Silicon Valley if that bet doesn't work out or companies pull back. Google, Meta, Microsoft and Amazon are on track to spend nearly $400 billion this year on data centers...
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> Concern about a potential bubble in AI investment has recently grown in technology and financial circles. ChatGPT and other AI tools are hugely popular with companies and consumers, and hundreds of billions of dollars has been sunk into AI ventures over the past three years. But few of the new initiatives are profitable, and huge profits will be needed for the immense investments to pay off... "I'm getting more and more skeptical and more and more concerned with what's happening" with artificial intelligence, said Andrew Odlyzko, an economic historian and University of Minnesota emeritus professor who has studied financial bubbles closely, including the telecom bubble that collapsed in 2001 as part of the dot-com crash. Some industry insiders have expressed concern that the [3]latest AI releases have fallen short of expectations, suggesting the technology may not advance enough to pay back the huge investments being made, he said. "AI is a craze," Odlyzko said...
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> [The Federal Reserve's August "beige book" summarizes interviews with business owners across the country, according to the article — and it found surging investments in AI data centers, which could tie their fortunes to other sectors.] That's boosting demand for electricity and trucking in the Atlanta region, a hot spot for the facilities, and creating new projects for commercial real estate developers in the Philadelphia region. Because tech companies now dominate public markets, any change in their fortunes and share prices can also have a powerful influence on stock indexes, 401(k)s and the wider economy... Stock market slumps can have knock-on effects by undercutting the confidence of American businesses and consumers, leading them to spend less, said Gregory Daco [chief economist at strategy consulting firm EY-Parthenon]... "That directly affects economic activity," he said, potentially widening the economic fallout...
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> Goldman Sachs analysts wrote in a Sept. 4 note to clients that even if AI investment works out for companies like Google, there will be an "inevitable slowdown" in data center construction. That will cut revenue to companies providing the projects with chips and electricity, the note said. In a more extreme scenario where Big Tech pulls back spending to 2022 levels, the entire S&P 500 would lose 30 percent of the revenue growth Wall Street currently expects next year, the analysts wrote.
The AI bubble is 17 times the size of the dot-com frenzy — and four times the subprime bubble, according to estimates in a recent note from independent research firm the MacroStrategy Partnership (as [4]reported by MarketWatch ).
And "never before has so much money been spent so rapidly on a technology that, for all its potential, remains somewhat unproven as a profit-making business model," [5]writes Bloomberg , adding that OpenAI and other large tech companies are "relying increasingly on debt to support their unprecedented spending." (Although Bloomberg also notes that ChatGPT alone has roughly 700 million weekly users, and that last month Anthropic reported roughly three quarters of companies are using Claude to automate work.)
[1] https://www.msn.com/en-us/money/markets/one-force-is-propping-up-the-economy-fears-are-growing-it-won-t-last/ar-AA1NAuUx
[2] https://www.washingtonpost.com/business/2025/09/25/economy-gdp-spending-trump-federal-reserve-rates/140ad1da-9a0d-11f0-8ce3-5abc3053a693_story.html
[3] https://www.washingtonpost.com/technology/2025/08/17/openai-gpt5-chatgpt-superintelligence/
[4] https://www.marketwatch.com/story/the-ai-bubble-is-17-times-the-size-of-the-dot-com-frenzy-this-analyst-argues-046e7c5c
[5] https://finance.yahoo.com/news/why-fears-trillion-dollar-ai-130008034.html
Here’s what happens (Score:1)
The losses will be covered by the taxes you and I pay. Why do you think they all attended the inauguration?
Re: (Score:2)
You are right of course and I don't know why you got down voted. The taxpayers are already paying through AI integration into the WAR department and Homeland ICE. Taxpayers are already directly paying for 20% and higher electricity cost in many parts of the country and the environment and peoples are paying for the many costs of higher fossil fuel use.
POP (Score:2)
It's going to be the POP heard around the world.
Re: POP (Score:2)
They will just pivot. Bitcoin drove the gpu prices up, nft, etc.. if AI pops, they will just figure out a way to reuse the "machines".
I do think there is way too much hype but the horse has left the barn and this will not just go away.
GLD (Score:2)
GLD has been going up like crazy. 45% YTD. QQQ has made that money in 6 the last 6 months. SPY is a bit behind at 32%.
All I can say is, as soon as you start seeing ripples, it'll mean the AI bubble is bursting. Sell everything and run to GLD. This crash is gonna be stupid big and it won't be just "the market". The USD is taking a hit and oh boy it'll suffer when the AI bubble bursts.
Which is a shame because I've found actually great use cases for AI. For example, Adobe has this tool (Adobe Podcast) that tak
Re: (Score:2)
The AI that cleans up your audio isn't an LLM. The bubble is about LLMs.
Re: (Score:2)
I'm tempted to agree. But I will say this, you know how people say, "ohh, I had all this apple stock, but I sold it in 2008 because I was already up by a factor of 10." And now it's up by another factor of 50. Well, this is then, for some small number of companies... but which?
You know what company I think is poised to make a vast amount of money on AI? Waymo. (That is, Alphabet, as in google). I know, Alphabet is already valued at $3T which seems pretty insane...
The safe bet⦠(Score:2)
Itâ(TM)s hard to predict the details; but itâ(TM)s fairly safe to assume that the guilty parties will walk away loaded(they will lose 90% of the imaginary froth money; but the remainder will serve them just fine); and weâ(TM)ll end up with the bill.
Not much (Score:2)
Nothing of value would be lost.
Real progress continues (Score:2)
Engineers and scientists continue to make great progress
The financial world is dominated by gamblers, hypemongers and other crystal ball gazers who foolishly believe they can predict the future
Financial gambles sometimes fail, sometimes spectacularly
Engineers and scientists survive and continue working
Re: (Score:2)
Indeed. One thing I tell my IT/CS engineering students is that they need to plan for being unemployed/low employed for a couple of years on occasion, because the economics graduates are collectively stupid and panicky. The next thing I recommend is when things pick up again to sell themselves expensively to recover the loss or insist on other benefits. The economics morons will not have a choice.
Not a big issue, good engineers understand having reserves and fallback plans.
Why "if"? (Score:3)
The question is "when". Seriously, stop hallucinating.
I will NEVER pay a dime to use AI. (Score:1)
ChatGPT is fine for specific tasks, but when I bump into a daily limit, I stop for the day. Or move to one of the other AI's out there, including the Chinese one. I will NEVER pay a dime for AI; they are already getting skewed by the political leanings of their corporate overlords. NOT A DIME.
You know what they say about assumptions (Score:2)
> "Last week, the United States reported that the economy expanded at a rate of 1.6 percent in the first half of the year, with most of that growth driven by AI spending. Without AI investment, growth would have been at about a third of that rate, according to data from the Bureau of Economic Analysis."
Or that same money would have been spent on something else instead. Maybe something that won't turn out to be snake oil.
AI centers get tariff exemption, not the taxpayers (Score:2)
That's right. AI has more rights under DT than you and I and the American people. While we are stupefied by the DT barrage and not paying attention, they are just picking our pockets.
Pollution would be reduced! (Score:2)
Fuck your stupid money concerns about deluded billionaires, what about the environment? Bullshit computing because of AI uses a HUGE amount of electricity. If that were disappear then less energy would be generated. Since renewables are always generating electricity, it means that fewer fossil fuels would be burned.
I don't give a damn about people with delusions of building an AI god, I care about if people are going to die as a result of your delusions. Climate change is real, your AI gods/slaves are not.
Same as last time (Score:1)
Someone starts in his garage with an online marketplace for models and takes over the world, or in the top 10 marketcap companies in the world. Just like pets.com got swallowed up and we now order dogfood with Amazon prime.
Already prepared for it (Score:2)
Obviously the bubble is going to burst, so I'm preparing for it already.
First I stopped using AI-centered products. When the bubble bursts, my tools don't all stop working. Also helps if I don't use companies that rely too much on AI.
Second I changed my investments (401k, IRA, HSA, etc) away from big tech companies. There's plenty of index funds that don't have a heavy bias toward tech or AI. The whole market will dip, but if you're not in AI you won't feel it as bad.
Third I'm building out residential solar
Imagine (Score:2)
Just imagine if this much money and effort had gone into nuclear fusion, securing clean energy for the rest of humanity's future.
Re: (Score:3)
This goes directly against Big Oil. Not only including oil companies, but also oil exporters.
Re:Imagine (Score:5, Informative)
Thankfully, need for that stuff is on a downward trend.
As for the bubble, I think it extends way beyond AI. The US economy has been a mirage for some time now. I welcome the pop, so that the focus of the economy shifts to things that are real, and benefit the people. Maybe we'll even get a democratic system of government out of it, hard times can force people to work together on important tasks they don't have an incentive to when they're able to just cruise social media all day and get fat.
Re: (Score:2)
No it's not? What are you talking about? Most cars by FAR are still ICEs and that's the main market for oil. A few first-world countries have a statistically significant amount of electric cars, but the rest of the world is still driving ICEs and will continue to do so for a long time.
It's not just the capital cost of an electric car, which is still ridiculous compared to an ICE (most electrics are premium and sold to high income "eco conscious" buyers who can afford to choose to pay more). Even if electric
Re: (Score:2)
> What are you talking about?
A trend. You recognize what this concept is, otherwise you wouldn't have speculated where the demand will be in 20 years.
Re: (Score:2)
That's a good one. Unfortunately for everyone this bubble bursting means that everyone will look for the next one to replace it with. No one wants to make real things that benefit people when they can get rich quick instead or sit back while someone else makes the real things for them, whether they're beneficial or not.
The best we can hope for is that the air is let out slowly instead of the whole thing rupturing at once. What happens in hard times at the beginning is that everyone panics and is out for
Re: (Score:1)
Why stop there? Healthcare, education, daycare for parents because a single income can no longer support a family. Install solar panels over the thousands of acres of parking lots. It’s free electricity being wasted. Don’t threaten me with a good time!
Re: Imagine (Score:2)
Unfortunately big companies are not interested in anything that doesn't bring short-term returns.
Re:Imagine (Score:4, Insightful)
> Just imagine if this much money and effort had gone into nuclear fusion, securing clean energy for the rest of humanity's future.
Fusion is an unproven technology. Solar, wind and energy conservation are proven, cost effective and realistic technologies. We don't need to wait for fusion when we already have the real solutions being developed right now.
Re: (Score:3)
"Solar, wind and energy conservation are proven, cost effective and realistic technologies"
Oh FFS, how many times does the word "baseload" have to be mentioned before people like you get it? Yes , solar and wind should be an essential part of the mix - but the sun doesn't shine at night or much at all during a northern winter and wind power often isn't much use when there's a slopw moving high pressure system sat above (which is pretty bloody often in a large part of the world). And no, you can't just rely
Re: (Score:2)
I guess you're one of those "the glass is always empty" people. There are storage options beyond batteries, some work in the cold. And no one's building AI data centers in the artic, so I think it's safe to ignore your straw-man argument.
Re: (Score:2)
Fusion research is not fast and cannot be. Too many things have to be invented from scratch. Realistic projections for it having a real impact are currently around the 50 year mark and more money is not going to have much effect on that. These things take time.
But this amount of money going into reasonably mature renewables and storage would have made a massive difference. Greed, arrogance, stupidity and ignorance prevent sane used of money at this scale.