- Many technical leaders agree that there is an AI bubble
- If this blasts, devastating influences can mug through the economy
- Bank of England is the latest to warn about the risk
Muttering continues to swirl around “an AI bubble” – Jeff Bezos has admitted what Sam Altman has admitted it, and now financial institutions are starting to sound the alarm over the potential catastrophic crash that the economy faces if the bubble bursts.
The Bank of England’s Financial Policy Committee warned ‘The risk of sharp market region’ has increased and that investors have not fully taken into account these risks.
“On a number of measures, valuations of the stock market occur, especially for technology companies that are focused on artificial intelligence. This … leaves stock markets, especially exposed if the expectations of the impact of AI become less optimistic,” Guardian reports.
Boom and bust
Huge circular offers between NVIDIA, AMD, Openai and Oracle have seen billions of dollars committed between companies for financing chips, infrastructure and AI models – which have given rise to serious concern;
“Today’s valuations are heading for levels we saw under bullishness around the Internet 25 years ago … If a sharp correction were to occur, tightening economic conditions could pull down world growth, expose vulnerabilities and make life particularly hard for developing countries,” warned the leader of the IMF, Kristalina Georgieva.
Some studies have even demanded that AI-related capital costs have surpassed the consumer in the United States as the primary driving force for economic growth in the first half of 2025.
“AI-related shares have taken into account 75% of S&P 500 returns, 80% of earnings growth and 90% of the growth in capital costs since Chatgpt launched in November 2022,” said Michael Cembalest, president of JP Morgan Asset Management Strategy.
It is a hell of a lot of expenses considering that research recently revealed that almost all (95%) of generative AI pilots fail. If investors do not start seeing profits soon, the stock market assessment may suffer.
Real use cases of AI have also wobbled, with Deloitte forced to repay the Australian government after it used AI to produce a miscarriage report that included false quotes, false footnotes and composite court quotes.
Although the AI expenses appear to continue to rise in the foreseeable future, some reports indicate that AI uses actually fall into large organizations -which can signal the beginning of the end of the AI boom.
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