The AI Bubble Is About To Burst, But The Next Bubble Is Already Growing

Techbros are preparing their latest bandwagon.

Photo by Dynamic Wang on Unsplash

Speculation rules the world. It didn’t used to. But from the 1980s through to 2008, something changed. Investors realised that they could get far more return from hype than from any kind of legitimate business. This is the information age, after all, and information is easy to manipulate and commodify. This led to the dot-com bubble, the 2008 credit crunch, the 2016–2017 cryptocurrency bubble, the late 2020–2021 cryptocurrency bubble, and the 2022 NFT bubble, with the latest fad being the AI bubble. In fact, nearly half of the world’s private investment is being funnelled into AI, and AI speculation is the main driving force behind the S&P 500’s recent growth. But, just as the others did before their catastrophic failure, the AI bubble is showing signs of imminent bursting. However, the finance and tech bros have learnt their lesson and are developing the next bandwagon to ride off into the sunset with all our money, ready for when they inevitably need to jump ship. It’s just a shame that it’s even more of a dead end than AI.

So, it’s essentially common knowledge that the AI bubble is ripe for bursting. Things like the efficient compute frontier (read more here) and the Floridi conjecture (read more here) mean that the AI models we have now are about as good as they will ever be. Even if OpenAI spent trillions of dollars increasing the size of their models tenfold, they would only be slightly better. The recent release of ChatGPT-5 is a perfect example of this. It had significantly more data, training, and cash shoved into it than its little brother ChatGPT-4, yet it is only marginally better than ChatGPT-4.

This is a huge problem! Because, as they currently stand, generative AI models aren’t actually that useful or even remotely profitable.

An MIT report found that 95% of AI pilots didn’t increase a company’s profit or productivity. For the 5% in which it did, the AI was relegated to back-room, highly constrained admin jobs, and even then, there were only marginal improvements. A METR report found that AI coding tools actually slow developers down. The inaccuracy of these models means they repeatedly make very bizarre coding bugs that are highly arduous to find and correct. Logically, it is quicker and cheaper to get a developer to code it themselves. Research has even found that for 77% of workers, AI has increased their workload and not their productivity. As it stands, generative AI is far too error-prone to deliver meaningful increases in productivity or profitability in the vast majority of use cases.

In other words, for AI models to actually deliver on the speculation driving their massive investment, they need to become far, far better, which involves spending exponentially more money.

This is another huge problem, given that OpenAI, which has by far the largest customer base of any generative AI company, is still losing money hand over fist for every one of its $200-per-month plans. In fact, it seems they would need to sell it at more like $2,000 per month to break even (read more here).

Big Tech, backed by venture capital and investment banks, has spent hundreds of billions of dollars each year on AI for the past few years. Yet the technology is reaching its limitations and can’t improve, as well as being far, far away from profitability. It is a perfect bubble, with colossal amounts of money being used to bolster completely unfounded and outright false speculation. And now, with GPT-5’s disappointment, Meta’s restructuring and downplaying of its AI division, and interest rates threatening to rise, the very investors who helped inflate this bubble are warning that it will burst. Even Goldman Sachs, which has piled tonnes of money into the AI bubble, has warned that the AI bubble will likely pop soon, and when it does, it will also take the data centre bubble down with it, causing immense damage to not just xAI, Meta, Google, Anthropic and OpenAI, but also tertiary players like Amazon, Oracle and Nvidia who provide AI infrastructure.

In other words, when this bubble bursts, it will deal unbelievable damage to every weird tech bro and toxic finance guy you know.

Fortunately, they have a plan to sidestep this man-made economic apocalypse. Quantum computers. And they are all desperate for us to hop on the new bandwagon.