When It All Comes Crashing Down: The Aftermath of the AI Boom
jelizondo writes:
The Bulletin of the Atomic Scientists published a report on the possible crash of the AI bubble:
Silicon Valley and its backers have placed a trillion-dollar bet on the idea that generative AI can transform the global economy and possibly pave the way for artificial general intelligence, systems that can exceed human capabilities. But multiple warning signs indicate that the marketing hype surrounding these investments has vastly overrated what current AI technology can achieve, creating an AI bubble with growing societal costs that everyone will pay for regardless of when and how the bubble bursts.
The history of AI development has been punctuated by boom-and-bust cycles (with the busts called AI winters) in the 1970s and 1980s. But there has never been an AI bubble like the one that began inflating around corporate and investor expectations since OpenAI released ChatGPT in November 2022. Tech companies are now spending between $72 billion and $125 billion per year each on purchasing vast arrays of AI computing chips and constructing massive data centers that can consume as much electricity as entire cities-and private investors continue to pour more money into the tech industry's AI pursuits, sometimes at the expense of other sectors of the economy.
That huge AI bet is increasingly looking like a bubble; it has buoyed both the stock market and a US economy otherwise struggling with rising unemployment, inflation, and the longest government shutdown in history. In September, Deutsche Bank warned that the United States could already be in an economic recession without the tech industry's AI spending spree and cautioned that such spending cannot continue indefinitely.
Warning signs.Silicon Valley's focus on developing ever-larger AI models has spurred a buildout of bigger data centers crammed with computing power. The staggering growth in AI compute demand would require tech companies to build $500 billion worth of data centers packed with chips each year-and companies would need to rake in $2 trillion in combined annual revenue to fund that buildout, according to a Bain & Company report. The report also estimates that the tech industry is likely to fall $800 billion short of the required revenue.
That shortfall is less surprising than it might seem. US Census Bureau data show that AI adoption by companies with more than 250 employees may have already peaked and began declining or flattening out this year. Most businesses still don't see a significant return on their investment when trying to use the latest generative AI tools: Software company Atlassian found that 96 percent of companies didn't achieve significant productivity gains, and MIT researchers showed that 95 percent of companies get zero return from their pilot programs with generative AI. [...] Claims that AI can replace human workers on a large scale also appear overblown, or at least premature. When evaluating AI's impact on employment, the Yale Budget Lab found that the "broader labor market has not experienced a discernible disruption since ChatGPT's release 33 months ago," according to the group's analysis published in October 2025.
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