Worries that the massive, high-speed spending in the Artificial Intelligence (AI) sector could lead to a sudden and painful market crash are at an all-time high with major financial and tech figures sounding the alarm.
Experts are now warning of a crisis that echoes the 2000 dot-com bubble burst.
Bret Taylor, OpenAI Chairman, also compared the current situation directly to the 2000 crash. He said, “It is both true that AI will transform the economy… and that we’re also in a bubble, and a lot of people will lose a lot of money.”
The core concern is that the sky-high values of AI companies are built on hope and investment deals rather than proven real-world profits.
Tech giants are spending trillions of dollars on things like advanced chips and huge data centres out of fear of falling behind but no one knows if they can earn all that money back.
According to reports, companies like OpenAI are taking on large debt, expecting to burn through $115 billion by 2029 on infrastructure.
OpenAI CEO Sam Altman himself has acknowledged the wild nature of the market his company leads: “Are investors overexcited? In my opinion, yes.”
Chipmakers like Nvidia and AMD are giving huge investments or special deals to AI startups which then use that money to buy the chipmakers’ expensive processors. Critics say this is a “circular” system that falsely inflates both the chipmakers’ sales and the startups’ valuations.
A key study from MIT found that most companies adopting AI tools are not seeing financial benefits.
“95% of organisations are seeing no return on their spending.”
Instead of truly revolutionary productivity, researchers from Harvard and Stanford note that employees are often using AI to create “workslop” content that looks good but adds no real business value.
The major fear is not that AI is fake but that a crash could wipe out smaller companies and hurt the entire economy, given that a small group of big tech stocks now makes up an unprecedented 40% of the S&P 500 Index.
