The AI Bubble Is Far Worse Than We Thought

2008 who?

Photo by Ryan Braxton on Unsplash

Everyone who isn’t a tech bro weirdo can see that the AI industry exists in a bubble. The big question so far hasn’t been “if” there is a bubble, but how large it is, when it will pop, and who it will affect. Sadly, because no one has a crystal ball, we can never hope to figure out when shit will truly hit the fan. But we have also struggled to pin down the size of this bubble, as the reality of AI economics has become muddied by Big Tech propaganda. Likewise, these corporations have propagandised their finances to the point of unreality, making it nearly impossible to figure out who is actually connected to the bubble. However, recent analysis has cut through this cloud of doubt, and reality is far more terrifying than we thought possible. This isn’t a bubble — it is a financial nuclear bomb.

Let’s start with the truly gut-flipping findings of Julien Garran.

Garran is an analyst for MacroStrategy Partnership, an independent research firm that advises 220 institutional clients. He also previously led UBS’s commodities strategy team. Needless to say, he understands his subject material. But his recent analysis discovered that the AI bubble was 17 times the size of the dot-com bubble and four times larger than the 2008 housing bubble!

How did he arrive at that figure?

Well, he calculated it in a very similar way to how I did in a previous article (read here), but with far, far better economic analysis.

Like me, Garran pointed to the efficient compute frontier and the diminishing returns of AI, causing costs to skyrocket and progress to stagnate. This is why ChatGPT-3 cost $50 million, ChatGPT-4 cost $500 million, and ChatGPT-5 cost $5 billion, yet the improvement between these generations has been so slim it is almost unnoticeable. This wouldn’t be a problem if these AIs had reached a point of usefulness, but they haven’t. Like me, Garran points to the plethora of studies that prove AI deployments offer practically no benefit, aren’t profitable, and actually make companies less efficient. As such, the AI industry and the gargantuan investment behind it are a dead end, creating a bubble.