AI bubble
In plain wordsThe worry that investors are pouring far more money into AI companies, chips and data centers than AI will earn back soon, so that prices could crash as in the dot-com bust of 2000.
A hypothesized speculative bubble in AI-related assets, in which the valuations of AI developers, chipmakers and cloud and data-center companies, and the capital spending they finance, exceed what realistic future revenues can justify. Those who see a bubble point to capital expenditure by the largest technology firms running at several hundred billion dollars a year; growing reliance on debt and private credit; circular dealscircular deal, n.: A business arrangement in which an AI chip or cloud supplier invests in, or lends to, a customer that then spends the money buying the supplier's own products. in which suppliers invest in customers who then buy their products; heavy losses at leading model developers; a few firms accounting for most US stock-market gains; and modest measured productivity gains so far (see productivity paradoxproductivity paradox, n.: The puzzle that a powerful new technology, like computers in the 1980s or AI today, can be everywhere without showing up as faster growth in how much workers produce.). Skeptics of the bubble thesis reply that, unlike in 2000, the leading firms have large profits and cash flows, demand for computecompute, n.: The raw computing power used to train and run AI, usually measured by how many specialized chips are used and for how long. With data and algorithms, it is a main driver of AI progress. exceeds supply, and usage and revenue are growing fast. Many argue both can be true: a financial bubble can burst while the technology, like the internet after 2000, proves transformative.
Whether or not it is an AI bubble, the depreciation schedules on those GPUs look optimistic.
Origin
Comparisons between the AI boom and the dot-com bubble became common from 2023 and intensified through 2025, with warnings from investors, central banks, the International Monetary Fund and some AI executives. A sharp sell-off in AI-related stocks on 23–26 June 2026, which began with chipmakers in South Korea and spread worldwide, and further swings in later months kept the debate alive; as of October 2026 it remained unresolved.
Usage note
A bubble can be confirmed only after the fact. The word is used both for a precise financial claim (prices above fundamental value) and loosely for inflated expectations; see AI hypeAI hype, n.: Exaggerated claims about what AI can do or will soon do, made to attract money, attention or customers, which can mislead the public and policymakers..
Related
- AI hypeAI hype, n.: Exaggerated claims about what AI can do or will soon do, made to attract money, attention or customers, which can mislead the public and policymakers.
- hype cyclehype cycle, n.: A pattern in which excitement about a new technology rises to a peak, crashes into disappointment, then slowly recovers as the technology finds real uses.
- productivity paradoxproductivity paradox, n.: The puzzle that a powerful new technology, like computers in the 1980s or AI today, can be everywhere without showing up as faster growth in how much workers produce.
- concentration of powerconcentration of power, n.: The worry that AI will put enormous economic, political or military power in the hands of a few companies, governments or individuals, beyond the reach of ordinary checks and balances.
- AI data centerAI data center, n.: A building or campus packed with AI chips, power equipment and cooling, built to train and run AI models. The biggest use as much electricity as a city.
- StargateStargate, prop. n.: A giant venture announced in 2025 by OpenAI, SoftBank and Oracle to build data centers in the United States for training and running AI, with a pledged $500 billion.
- DeepSeek momentDeepSeek moment, n.: The shock of January 2025, when a little-known Chinese company released a free AI model nearly as good as the best American ones at a fraction of the reported cost, briefly wiping hundreds of billions off chip stocks.
- AI winterAI winter, n.: A slump in which disappointment over AI's unmet promises leads governments and companies to pull back money and attention. Historians count two big ones: one in the 1970s and one starting in the late 1980s.
Sources
- Cahn, D. (2024). AI's $600B Question. Sequoia Capital, June 2024.
- Acemoglu, D. (2024). The Simple Macroeconomics of AI. NBER Working Paper.
Mentioned in
AI winterAI winter, n.: A slump in which disappointment over AI's unmet promises leads governments and companies to pull back money and attention. Historians count two big ones: one in the 1970s and one starting in the late 1980s., AI hypeAI hype, n.: Exaggerated claims about what AI can do or will soon do, made to attract money, attention or customers, which can mislead the public and policymakers., AI washingAI washing, n.: Falsely claiming that a product or company uses AI, or exaggerating how much it does, to look more advanced and attract customers or investors., hype cyclehype cycle, n.: A pattern in which excitement about a new technology rises to a peak, crashes into disappointment, then slowly recovers as the technology finds real uses., hyperscalerhyperscaler, n.: One of the few giant technology companies — such as Amazon, Microsoft, Google and Meta — that run vast networks of data centers and spend most of the money that builds AI computing., Jevons paradoxJevons paradox, n.: The observation that making something more efficient can make people use more of it overall because it gets cheaper — as with coal in the 1800s, and with AI computing today., neocloudneocloud, n.: A newer kind of cloud company that mainly rents out powerful AI chips, rather than the full range of computing services that giants like Amazon or Microsoft sell., productivity paradoxproductivity paradox, n.: The puzzle that a powerful new technology, like computers in the 1980s or AI today, can be everywhere without showing up as faster growth in how much workers produce., circular dealcircular deal, n.: A business arrangement in which an AI chip or cloud supplier invests in, or lends to, a customer that then spends the money buying the supplier's own products., CoreWeaveCoreWeave, prop. n.: An American company that rents out huge numbers of Nvidia graphics processors over the internet to AI developers such as Microsoft, OpenAI and Meta., reverse acquihirereverse acquihire, n.: A deal in which a big tech company hires a start-up's founders and top staff and pays to license its technology, without buying the company itself.