Key Points
- As Big Tech reports earnings, there are growing fears of an AI-driven stock market bubble.
- Major industry figures like Sam Altman and Jeff Bezos have warned that the hype has outrun reality.
- While companies are spending hundreds of billions on AI, the actual returns remain highly uncertain.
- A web of “circular deals” between top AI players is adding to the nervousness.
As America’s tech giants get ready to report their quarterly earnings this week, a big, uncomfortable question is hanging over the market: Is the artificial intelligence boom that has sent their stock prices soaring actually a massive bubble?
On the surface, everything looks great. Microsoft, Google, Amazon, and Meta are all expected to report strong revenue growth, and they will likely tell investors they are continuing to pour billions into AI because of its long-term promise. But behind the scenes, there’s a growing sense of unease.
Even some of the biggest names in the industry, including OpenAI’s Sam Altman and Amazon’s Jeff Bezos, have recently warned that the AI frenzy has gotten ahead of itself. Investors are getting nervous, yet they’re afraid to bet against the rally.
The problem is that while the tech giants are spending a collective $400 billion on AI infrastructure this year, the actual returns on that investment remain very uncertain. A recent MIT study found that only about 5% of AI projects actually deliver measurable gains. Even Andrej Karpathy, a former AI head at Tesla, recently said, “the models are not there… It’s slop.”
Adding to the worries is a tangled web of “circular deals” between the top AI players, reminiscent of the dot-com bubble. For example, Nvidia is investing up to $100 billion in OpenAI, one of its biggest customers. These kinds of deals, in which companies both fund and rely on each other, can create a dangerous feedback loop that isn’t based on real demand.
