The AI Industry Is Panicking
Is the AI bubble bursting?
Have you noticed that the AI bros are starting to panic? All of a sudden, they have dramatically U-turned on the notion that AI will take vast swathes of the job market despite that claim being critical to AI’s hype and the entire point of this ‘revolution’, they are desperate to gain US government backing, and they are pushing some of the most overpriced IPOs in history despite all of their companies being closer to a cash bonfire than a functional business. This is peak frenzy behaviour, the kind of stuff you see right before the bubble bursts. It is a thinly veiled, desperate attempt for them to find a stooge of a bagholder and cash out before the entire thing collapses. But why? Well, a lot has changed over the past few weeks, so let me walk you through everything.
The Debt & Bet
Here is a question: how much money do you think has been invested in the AI industry?
According to Reuters, investors and companies had poured around $2 trillion into AI by the end of 2025. But that isn’t quite the whole picture, as the AI industry has not just received cash investments but also racked up a colossal amount of debt. Much of this debt is obfuscated using weird company structures, which means Reuters probably hasn’t taken all of it into account.
J.P. Morgan alone has $1.5 trillion in AI-related debt. AI debt also makes up roughly 15 -20% of corporate bond indices(referring to debt a company issues, not a bank), meaning there is well over $1.5 trillion in AI-related bond debt in the open market, too. In fact, AI is now linked to more debt than banks!
It is difficult to pull together an accurate total figure, but we can be sure that multiple trillions of dollars have been invested in the AI industry with much of that being debt. This debt is also set to balloon, with just a handful of companies poised to rack up another $1 trillion in AI-tied debt over the next few years. So, in the next year or two, AI-related debt alone could easily reach $3 trillion.
This creates an implicit bet.
To provide some rough context, let’s say that the entire AI industry has $3 trillion of bond debt, at a typical market rate of 3% over a ten-year period. Paying the interest and capital each year will total $309 billion.
This means that for the AI industry to service its debt, it needs to generate hundreds of billions of dollars in profit each year.
Even giant monopolies like Google don’t make enough profit to service that much debt. AI can’t just be a novelty industry; it needs to replace human labour on a colossal scale to service this debt. Let’s optimistically assume AI one day reaches a 10% profitability margin, a cost parity with human labour, and the ability to complete most jobs (none of which are currently the case). Well, the average US salary is roughly $66,000, so at a 10% profit, the AI company will make on average $6,600 per year per job it replaces. To generate the $309 billion needed to service their debt, the AI industry will need to replace 46.8 million jobs, equivalent to around 27% of the current number of jobs in the US.
While this is all very rough maths, it highlights the implicit bet created by the debt the AI industry has racked up. To simply not default on this debt, the AI industry has to rapidly displace human labour at a staggering scale, even if we are extremely optimistic about AI’s economics. In other words, the AI industry has made a gargantuan bet that AI will create a jobpocalypse, and if it fails, their entire industry, and much of the financial systems that our modern society depends upon, are on the line.
This is not just my opinion, but that of “AI Godfather” Geoffrey Hinton.
There is just one problem with this bet: it obviously isn’t paying off.
No Jobpocalypse
You may have noticed that, despite a whirlwind of propaganda trying to convince you otherwise, people are not losing their jobs to AI — at least not at a meaningful scale.
Oxford Economics has found that companies “don’t appear to be replacing workers with AI on a significant scale” and instead suggest that they are actually using the AI layoff narrative to cover up their own shortcomings.
Why? Because AI doesn’t actually increase overall productivity. It might increase the productivity of a single task when quality control is disregarded, but this increase doesn’t scale to job, organisational or economy-wide productivity growth. Indeed, Oxford Economics said, “If jobs are being replaced, where’s the productivity surge?” which is apt, given that economy-wide productivity is relatively stagnant at the moment.
More recent studies have supported this theory, such as this one, which surveyed 6,000 CEOs, CFOs and other C-suite executives across various countries, nearly 90% of whom reported that AI has had no impact on employment or productivity over the past three years.
In fact, we are actually seeing the opposite effect.
