AI Bubble

Extracted Attributes

• Nature

  Economic phenomenon

• Status

  Debated as a bubble or healthy correction within a longer AI super cycle

• Related Concept

  Trough of Disillusionment

• Comparison Point

  Self-driving technology development

• Highest ROI Area

  Back-office optimization

• Key Characteristic

  95% corporate AI pilot failure rate

• Technological Shift

  From monolithic Large Language Models (LLMs) to Small Language Models (SLMs) and Vertical AI Applications

• Estimated Capital Demand by 2028

  $3 trillion for data centers and high-performance chips

Timeline

• The AI boom began. (Source: Wikipedia, Summary)

  Late 2010s

• The AI boom gained international prominence, characterized by advancements in generative AI and scientific breakthroughs. (Source: Wikipedia, Summary)

  2020s

• Market analysis suggests a potential correction or the bursting of an 'AI Bubble'. (Source: Summary)

  Ongoing

• An influential MIT Generative AI study reveals that 95% of corporate AI pilots fail, with highest ROI in back-office optimization. (Source: Related Documents, Summary)

  Ongoing

• OpenAI CEO Sam Altman makes cautious comments regarding the AI landscape. (Source: Related Documents, Summary)

  Ongoing

• Meta institutes an AI hiring freeze, signaling a shift in market sentiment. (Source: Related Documents, Summary)

  Ongoing

• The release of DeepSeek's latest model sparks fears that the AI bubble may be about to burst. (Source: Web Search (Builtin.com))

  2025-01-XX

• Major tech companies plan to invest billions of dollars in AI infrastructure. (Source: Web Search (Builtin.com))

  2025-XX-XX

• An estimated $3 trillion in capital is projected to be needed for AI data centers and high-performance chips. (Source: Web Search (LATimes.com, Morgan Stanley))

  2028-XX-XX

AI boom

The AI boom is an ongoing period of progress in the field of artificial intelligence (AI) that started in the late 2010s before gaining international prominence in the 2020s. Examples include generative AI technologies, such as large language models and AI image generators by companies like OpenAI, as well as scientific advances, such as protein folding prediction led by Google DeepMind. This period is sometimes referred to as an AI spring, to contrast it with previous AI winters.

Web Search Results

• Is There an AI Bubble? - Artificial Intelligence

  ## Frequently Asked Questions ### Is there an AI bubble? Bubbles can only be conclusively identified after they’ve popped. That said, the artificial intelligence industry does appear to be in the midst of an economic bubble, insofar as high expectations and massive investments have yet to yield significant profits for companies. But the underlying technology and long-term potential of AI indicate it will have a lasting impact — even if some overvalued companies ultimately fail. [...] The release of DeepSeek’s latest model in January 2025 has sparked fears that the AI bubble may be about to burst. However, major tech companies aren’t slowing down, with plans to invest billions of dollars in AI infrastructure in 2025. It remains to be seen whether the so-called ‘AI bubble’ will actually burst or if continued investments will yield worthwhile returns. ### Recent Artificial Intelligence Articles [...] AI startups are hitting valuations that far exceed their actual earnings, while tech giants are investing billions into AI innovation despite limited profits from their AI products. Together, these trends suggest that we could be living through an AI bubble. ## What’s a Bubble?

• Say farewell to the AI bubble, and get ready for the crash

  According to the author’s perspective, the AI industry represents a dangerous bubble reminiscent of the 1990s dot-com era, with hundreds of billions invested in AI companies despite none achieving profitability. The author contends that public companies are frantically announcing AI capabilities merely to inflate their stock prices, while Nvidia plays a similar market-propping role that Intel did during the previous tech bubble. [...] The piece emphasizes that “artificial intelligence” is fundamentally a marketing term rather than a scientific one, arguing that AI promoters exploit public misunderstanding by anthropomorphizing chatbots and labeling their mistakes as “hallucinations.” The author cites the 1960s ELIZA chatbot experiment to demonstrate how humans have long been susceptible to attributing consciousness to simple computer programs. [...] That’s the principle undergirding the AI industry’s vast expenditures on data centers and high-performance chips. The demand for more data and more data-crunching capabilities will require about $3 trillion in capital just by 2028, in the estimation of Morgan Stanley. That would outstrip the capacity of the global credit and derivative securities markets. But if AI won’t scale up, most if not all that money will be wasted.

• An AI bubble? Why I don't care - by James Pethokoukis

  _Super-Short Summary: While AI-related stocks probably aren't currently in a bubble, historical patterns suggest speculative bubbles often accompany major technological innovations, according to Goldman Sachs. (Some great charts.) So relax. Recent studies indicate AI's significant potential to boost productivity across various sectors, particularly benefiting less experienced workers. Experiments show AI tools improving software developer productivity by 26 percent and translation tasks by 33 [...] This isn’t a financial newsletter, although investors might find it insightful. So I don’t much care if Wall Street considers shares of artificial intelligence-related companies to be in a bubble or not. At least I don’t care about the trading implications.

• Why the AI Hype is Another Tech Bubble

  Daniel, W. (2024/07/08). ‘AI has created a ‘fake it till you make it’ bubble that could end in disaster, market watcher warns’, Fortune. Deschenes, K. (2024/09/15). ‘Are We in an AI Bubble?‘, US News. Dobre, R., Bulin, D., & Iorgulescu, M. C. (2020). and Iulia Monica Oehler-Sincai. ‘Artificial Intelligence Sector: The Next Technology Bubble? A Comparative Analysis with Dotcom Based on Stock Market Data’, Romanian Economic Journal. [...] Stepek, J. (2024/07/09). ‘How Should. Bloomberg. You Invest Around the AI Bubble?’. Varanasi, L. (2024/08/30). ‘Signal president says generative AI is ‘definitely a bubble’ and Nvidia’s market is going to ‘die for a second’’. Business Insider. Walsh, B. (2024/08/06). ‘Nvidia, ChatGPT and more: Is there an AI bubble and is it about to pop?‘, Vox. Waters, R. (2024/09/15). ‘AI bubble set to inflate further’, Financial Times. [...] A tech bubble is a market phenomenon characterised by rapid (usually over many months) and financially unsustainable growth in the valuation of technology-related assets. It is typically driven by speculative investment and exuberance rather than fundamental value. It occurs when investors’ enthusiasm for emerging technologies or tech companies outpaces the actual development, implementation, or profit-generating potential of these innovations. This misalignment creates over time a widening,

• Watching the Generative AI Hype Bubble Deflate

  While talk of a bubble has simmered beneath the surface while the money faucet continues to flow,26 we observe a recent inflection point. Interlocutors are beginning to sound the alarm that AI is overvalued. The perception that AI is a bubble, rather than a gold rush, is making its way into wider discourse with increasing frequency and strength. The more industry bosses protest that it’s not a bubble,27 the more people have begun to look twice. [...] It’s not just technology companies questioning something they initially framed as inevitable. Recently, venture capital firm Sequoia Capital said that “the AI bubble is reaching a tipping point”31 after failing to find a satisfactory answer to a question they posed last year: “Where is all the revenue?”32 Similarly, in Goldman Sachs’ recent report, “Gen AI: too much spend, too little benefit?”,33 their global head of equity research stated, “AI technology is exceptionally expensive, and to [...] While critics of any technology bubble may feel vindicated by seeing it pop — and when stock markets and the broader world catch up with their gimlet-eyed early critiques — those who have been questioning the AI hype also know that the deflation, or even popping, of the bubble does not undo the harm already caused. Hype has material and often harmful effects in the real world. The ephemerality of these technologies is grounded in real-world resources, bodies, and lives, reminiscent of the