AI bubble pop is coming

This is just like 2000 and 2007.

• Runaway company valuations
• Unrealistic expectations of values going up forever
• Unsubstantiated pay packages for employees
• Deeply flawed underlying economic realities
• Inflation

Sound familiar? It preceded the dot-com bubble and the housing bubble and it’s happening now.

The hype cycle

This is the way bubbles are formed and evolved. The timing is sometimes variable and not everything eventually reaches productivity. For example, the Tulip bubble of 1634 was not a good investment and never became useful. On the other hand, the dot com collapse in 2000 eventually reached incredible value for the internet as a whole. Still, the collapse was brutal.

AI is currently at the peak of expectations. The companies involved are spending fortunes, the arms race for people is at a fever pitch. Everyone assumes AI is going to change the world immediately and make tons of money for everyone. We are not thinking clearly.

The problem is that the economics of it are sketchy at best. No one has a consumer product that people in droves are paying for. The likelihood is that someone will win that war, but everyone else is going to have their investments wasted.

I think the AI bubble is masking a major problem in the US economy. Tariffs were a terrible idea in the 1920’s and are a terrible idea now. There is a coming unemployment crisis. Either AI and robotics will take peoples jobs or an AI collapse will take people’s jobs. Either way, unemployment is coming.

Trump and his corrupt/inept administration are not prepared for any of this. They are going to hide the pain by releasing inaccurate numbers. They are going to lie to the public. It’s already happening.

This is in combination with a gutting of FEMA and the CDA and other government agencies. We are setting ourselves up for a perfect storm.

I almost always want to be optimistic. There is always the possibility of it working out. Always the eventual plateau. I hate to be chicken little.

Unfortunately, I have seen this movie multiple times. I know a bubble when I see it. I hope that I am very wrong. I really do.