The warning signs the AI bubble is about to burst(telegraph.co.uk)
telegraph.co.uk
The warning signs the AI bubble is about to burst
https://www.telegraph.co.uk/business/2025/08/20/ai-report-triggering-panic-and-fear-on-wall-street/
85 comments
https://archive.is/QH4hl
Given how much capital has already been committed to infrastructure development I find it very unlikely that even a Black Monday style market correction will do much to alter the medium and long term outlook for ai development and investment.
Too many people talk about a bubble almost wish-casting that such a thing will make this all go away. It’s probably safest to assume your political enemies won’t be hoisted on their own petard anytime soon.
Too many people talk about a bubble almost wish-casting that such a thing will make this all go away. It’s probably safest to assume your political enemies won’t be hoisted on their own petard anytime soon.
> Given how much capital has already been committed to infrastructure development I find it very unlikely that even a Black Monday style market correction will do much to alter the medium and long term outlook for ai development and investment.
So let's bet on sunken cost fallacy? That didn't work out during the dotcom era.
When people talk about the bubble is mostly about ending the LLM hype, not making everything associated just disappear. The infrastructure, ideas and developments will stay and probably end up being a lot more useful without the noisy hype surrounding it right now.
So let's bet on sunken cost fallacy? That didn't work out during the dotcom era.
When people talk about the bubble is mostly about ending the LLM hype, not making everything associated just disappear. The infrastructure, ideas and developments will stay and probably end up being a lot more useful without the noisy hype surrounding it right now.
It kind of did, Facebook, YouTube, Google, were all enabled by the massive internet cable infrastructure investment laid in the 90s.
Yep, but the dotcom burst was still was a burst. Ex post success does not matter in that analysis, and in fact, I'm arguing that the dotcom burst was instrumental for companies like Facebook, Youtube and Google to develop as they did.
A bursting bubble doesn't instakill an entire industry. No one is suggesting that. Bursting bubbles are harmful to most market participants and often have a blast radius beyond the industry. It's great that Facebook and YouTube emerged (I suppose) but that doesn't help grandad who lost 35% of his retirement fund.
> Given how much capital has already been committed to infrastructure development
Here’s the stupid thing about that infrastructure: This isn’t railroads. This isn’t skyscrapers. This isn’t underseas fiber optic. These are, at the end of the day, data center GPUs that can and will start failing en-masse on normal hardware timelines.
When that happens, they will all need to be replaced, at whatever rate NVIDIAs selling at - or can sell at, if there’s any geopolitical incidents. If there aren’t enough customers, capacity shrinks, and the remaining customers must foot the bill for the new system and the previous round of investment, causing a death loop wherever there isn’t profitable use feeding into the system.
A clearer comparison: It’s like if airlines had to replace their entire fleet every 3-4 years while selling $20 tickets to anywhere; and the growth metrics look incredible when everyone’s flying at that rate. So much so, that investors paid for the first fleet round calling it “infrastructure.” Meanwhile the amount of ticket sales keeps growing when everyone finds amazing use cases and new business models from the $20 tickets. Surely, this can only get better from here, and justifies even more fleet investment.
Here’s the stupid thing about that infrastructure: This isn’t railroads. This isn’t skyscrapers. This isn’t underseas fiber optic. These are, at the end of the day, data center GPUs that can and will start failing en-masse on normal hardware timelines.
When that happens, they will all need to be replaced, at whatever rate NVIDIAs selling at - or can sell at, if there’s any geopolitical incidents. If there aren’t enough customers, capacity shrinks, and the remaining customers must foot the bill for the new system and the previous round of investment, causing a death loop wherever there isn’t profitable use feeding into the system.
A clearer comparison: It’s like if airlines had to replace their entire fleet every 3-4 years while selling $20 tickets to anywhere; and the growth metrics look incredible when everyone’s flying at that rate. So much so, that investors paid for the first fleet round calling it “infrastructure.” Meanwhile the amount of ticket sales keeps growing when everyone finds amazing use cases and new business models from the $20 tickets. Surely, this can only get better from here, and justifies even more fleet investment.
All the things you mentioned require a lot of maintenance as well.
There are no 100 year graphics cards as there are tunnels and bridges is the point. The maintenance bill comes due a lot sooner then.
Yeah. This time it’s different.
The problem is it will create a broader economic problem in the markets.
The top 10 holdings for VTI, the "easy button" investment option. Are: NVIDIA, Microsoft, Apple, Amazon, Facebook, Broadcom, Google, Tesla, Berkshire Hathaway. They represent a third of US market value, and 60% of them are heavily hooked into AI. A panic will be a decimation for NVIDIA, and that splash zone will be broad.
The top 10 holdings for VTI, the "easy button" investment option. Are: NVIDIA, Microsoft, Apple, Amazon, Facebook, Broadcom, Google, Tesla, Berkshire Hathaway. They represent a third of US market value, and 60% of them are heavily hooked into AI. A panic will be a decimation for NVIDIA, and that splash zone will be broad.
$RSP (equal weighted) solves that
Totally! You can also use something like VIG or VDADX if you're restricted in terms of offerings.
I personally account for that in my planning. But many folks have their money in 401k funds in generic broad market securities -- often with high fees on top of it!
I personally account for that in my planning. But many folks have their money in 401k funds in generic broad market securities -- often with high fees on top of it!
> You can also use something like VIG or VDADX if you're restricted in terms of offerings.
How is that? RSP and VIG look very different.
How is that? RSP and VIG look very different.
VIG omits some of the high flier growth stocks that pay no dividend.
Ok so they sort of have something in common...but I'm not sure it's good advice to say one can be used to replace the other due to their very different overall strategies.
Fair. I should have qualified more clearly that I meant for retirement accounts where you have limited options.
RSP definitely performs better and doesn’t shut you out of the growth stocks.
RSP definitely performs better and doesn’t shut you out of the growth stocks.
I mean, every year or so there's a new NVIDIA GPU, making last years models obsolete and GPUs from 2 generations back essentially landfill. I don't think there's another large-scale investment that decays at this rate.
The infrastructure being there might also be a problem.
- If there's no breakthrough, and we're only going to make incremental gains, then its wasteful
- If there's a breakthrough, it might turn out a new AI architecture needs either lot less compute, or a different kind of it
The infrastructure being there might also be a problem.
- If there's no breakthrough, and we're only going to make incremental gains, then its wasteful
- If there's a breakthrough, it might turn out a new AI architecture needs either lot less compute, or a different kind of it
> I mean, every year or so there's a new NVIDIA GPU, making last years models obsolete and GPUs from 2 generations back essentially landfill. I don't think there's another large-scale investment that decays at this rate.
Ampere generation A6000’s are still selling used for close to MSRP on eBay. I bought an A4500, used it for a year and then sold it for MORE than I bought it for.
I’ve never seen computer hardware appreciate in value like it is now, even if new cards are still significant upgrades.
Ampere generation A6000’s are still selling used for close to MSRP on eBay. I bought an A4500, used it for a year and then sold it for MORE than I bought it for.
I’ve never seen computer hardware appreciate in value like it is now, even if new cards are still significant upgrades.
Yeah, I think it's pretty messy. I bought some keplers a year ago (far below MSRP), and they are fine -- but the trouble becomes software support; sort of like tablets/phones where the hardware's still more than enough, but because software stops supporting it, the landfill becomes landfilled -- excepting those people willing to set up the very specific environments where there's still use in them -- and to that end, obviously the things're more than a decade old, but hardly useless, though it would be fair to say most people would not run them.
If you can keep up software support, the hardware becomes much more valuable both now and later, but this is much harder to do in the consumer space where the software than in the industrial/AI space; I'd say the majority of my PC replacements until I was established financially were the result of software not supporting my hardware (not that it couldn't do the task if there were support, but simply that there was no support), and I should say, too, that in almost every case, I regretted dumping $1k in today-dollars for a single game or application otherwise.
Obviously, the problem's much worse with phones/tablets where most people use them for Cloud activities; people use them for 2-3 years and they go in the trash or their service provider might buy it back essentially as e-waste to be scrapped (despite marketing implications of them being reused to help surgeons in Africa).
If you can keep up software support, the hardware becomes much more valuable both now and later, but this is much harder to do in the consumer space where the software than in the industrial/AI space; I'd say the majority of my PC replacements until I was established financially were the result of software not supporting my hardware (not that it couldn't do the task if there were support, but simply that there was no support), and I should say, too, that in almost every case, I regretted dumping $1k in today-dollars for a single game or application otherwise.
Obviously, the problem's much worse with phones/tablets where most people use them for Cloud activities; people use them for 2-3 years and they go in the trash or their service provider might buy it back essentially as e-waste to be scrapped (despite marketing implications of them being reused to help surgeons in Africa).
This because of AI hype/demand, not a general rule...
It's exactly that: wishful thinking.
Clearly, a lot of people very desperately want AI tech to fail and disappear. And if there is such a strong demand for "tell me that AI tech will fail", then there will be hacks willing to supply.
Clearly, a lot of people very desperately want AI tech to fail and disappear. And if there is such a strong demand for "tell me that AI tech will fail", then there will be hacks willing to supply.
Even if AGI never happens, the existing models are already incredibly useful. I’ve switched to OpenAI Plus plan and almost never use Google search anymore. I pay $10/mo for GitHub Copilot for coding. So search and coding use cases are already seeing big improvements. But this same thing needs to happen to pretty much every product. So I think in the worst case they can just divert all of the training resources to just inference and be just fine. Sure the insane valuation multiples will drop if that happens and they will be valued as any other SaaS business.
> I’ve switched to OpenAI Plus plan and almost never use Google search anymore
A paid product is better than a free one! Who knew it could be!
A paid product is better than a free one! Who knew it could be!
NVidia’s PE is below 60 and they have 100% year over year revenue growth. A bubble is typically based on future earnings potential Nvidia is a money printing growth creating machine.
NVidia is selling “shovels to gold prospectors”
One indicator there may be a bubble is when internet investors are bragging about a P/E "under 60" like it's a safe pair of hands.
If you believe their earnings will continue increase at the same rate for next two years then it's more like getting in early on a P/E under 15. No bubble, just solid growth expectations.
Every time I see an article like this a quote comes to mind:
"The market can stay irrational longer than you can stay solvent." -- John Maynard Keynes
Predicting when a bubble is going to burst is close to impossible.
"The market can stay irrational longer than you can stay solvent." -- John Maynard Keynes
Predicting when a bubble is going to burst is close to impossible.
But it feels like it’s about to pop!
It really is hard to stay objective as predictors all seem to point one way.
It really is hard to stay objective as predictors all seem to point one way.
If people are so convinced the market is gonna crash very soon they can just short it and make millions easily.
Funny how no one's doing that amidst all the concerns and outcries expressed online.
Funny how no one's doing that amidst all the concerns and outcries expressed online.
What predictors do you mean? I’m genuinely curious
What predictors do you mean? I’m genuinely curious
I don't think you're genuinely curious because the title of the article is literally "The warning signs the AI bubble is about to burst."
I don't think you're genuinely curious because the title of the article is literally "The warning signs the AI bubble is about to burst."
Fortunately, there are open-end put options, so the timing doesn't have to be THAT accurate.
EDIT: to be precise: I mean open-end turbo put, which have no expiration but a knock-out.
EDIT: to be precise: I mean open-end turbo put, which have no expiration but a knock-out.
Put options have an expiration. So I'm curious what you mean by "open-end"?
Options exist with no expiration date, but they are not commonly traded. There's nothing in principle unusual about them, at least not more so than most other derivatives.
I mean a bursting bubble is what? A C-Suite pulling the valve shut or a company going under? It seems like the bubble has burst already then when Zuckerberg and Altman started decrying it earlier in the week. Now we just wait for all the smaller companies to either fold. For the larger companies the bubble will probably deflate slowly rather than burst.
There are no market indicators if the actual burst is at the whim of a human. Being that Meta can probably bleed for a while before seeing real losses after a burst. All they have to do is be the first one to stop growing while the bubble deflates.
There are no market indicators if the actual burst is at the whim of a human. Being that Meta can probably bleed for a while before seeing real losses after a burst. All they have to do is be the first one to stop growing while the bubble deflates.
A traditional bubble burst is when there is a major sector-wide selloff of an overinflated asset. When there is a race to not be one of the suckers left holding the bag.
As it turns out, the magic sauce that makes everything taste better is just ketchup.
It's good (maybe even indispensable) for some things. Please don't go "ketchup native" on my ice cream.
It's good (maybe even indispensable) for some things. Please don't go "ketchup native" on my ice cream.
The funny thing about bubbles is that they are impossible to predict. My sense is that they always go on longer than is at all rational. (Assuming this is a bubble, who knows.)
I’m still waiting for the crypto “bubble” to burst. Seems like we are years overdue ;)
I’m still waiting for the crypto “bubble” to burst. Seems like we are years overdue ;)
A good sign the bubble is not actually bursting: a mainstream news publication predicting it. [1]
It's still 1994. We won't be near the top until the Telegraph publishes an article overly exuberant about AI and saying AGI is here.
If every idiot commenting on Reddit, HN, X, and mainstream news publications is pessimistic and constantly shouting "bubble!," then definitionally, we have not reached irrational exuberance and we're not even remotely near the top.
[1] https://d.newsweek.com/en/full/566807/theinternetbah3.webp (1995)
It's still 1994. We won't be near the top until the Telegraph publishes an article overly exuberant about AI and saying AGI is here.
If every idiot commenting on Reddit, HN, X, and mainstream news publications is pessimistic and constantly shouting "bubble!," then definitionally, we have not reached irrational exuberance and we're not even remotely near the top.
[1] https://d.newsweek.com/en/full/566807/theinternetbah3.webp (1995)
Pretty telling how you dismiss what appears to be the majority opinion online just because it’s a majority opinion. Irrational exuberance is defined in the context of market participants. On a wealth adjusted basis commenters online make up a very small % of shareholders in AI related tech stocks. At least on HN many users are engineers meaning they are close to the metal so to speak whereas the people making investment decisions pride themselves on being detached from technical work even if they pretend to be technically competent in public.
Reddit/HN/X/etc are jam packed with tech workers with $hundreds of thousands of dollars in tech equity. I'm not sure what you're talking about, this board is quite literally the highest income community on the internet.
Given the tone of your comment, it doesn't sound like reasoning from first-principles logically, but instead reasoning from an emotional feeling and working backwards.
It sounds to be like you're hoping for the AI bubble to burst so you can experience the schadenfreude of the "technically incompetent dumb investors" you despise losing all their money.
Hoping for emotional validation is not a very convincing argument that it is happening right now imo.
Given the tone of your comment, it doesn't sound like reasoning from first-principles logically, but instead reasoning from an emotional feeling and working backwards.
It sounds to be like you're hoping for the AI bubble to burst so you can experience the schadenfreude of the "technically incompetent dumb investors" you despise losing all their money.
Hoping for emotional validation is not a very convincing argument that it is happening right now imo.
Every criticism of the wealthy is not always driven by jealousy. And classifying it as such is also a logical fallacy. Maybe engineers are tired of being told what to do by people who don’t understand what they do. Which I’ll admit is a form of resentment. But again that doesn’t make me wrong. Time will tell.
Maybe it is 2000 in your analogy.
Ah, so we are only 5 years away from he whole thing bursting? So, the papers in '94 warning about the dangers were just pessimistic idiot outlets? See ya in 5 years then.
What portion of AI spend is from non-hyperscalers? That feels like the most irrational part of this hype.
Can't wait for the pop to take out all the grifters and leave us to do the actual work in peace with reasonably priced GPUs.
We’re on our way down to the through of disillusionment. See you on the other side.
It would seem we’re speed running the hype cycle, so the other side might be sooner than we think.
Really dislike the "AI bubble" term conceptually. The mostly probable outcome here (imo) is absolute bloodbath among the startups that are essentially wrappers while the core tech keeps going without missing a beat and does eventually deliver.
They will keep going until VC runs out, wants to see profits or the stellar promises die out.
Time will tell, but one thing is for sure, not even the biggest players are exempt from any of the above.
Time will tell, but one thing is for sure, not even the biggest players are exempt from any of the above.
Yes bubbles always have survivors. They will be hurt and also one day worth much more than they are now.
The Fed is giving indications that rates will be cut. The bubble will not be bursting yet if that happens
If NVIDIA crashes, I can easily see the gov saving it in some way (either massively pumping liquidity or bailing it out). It’s too critical to the US at this point
If NVIDIA crashes, I can easily see the gov saving it in some way (either massively pumping liquidity or bailing it out). It’s too critical to the US at this point
cool time to buy some burst protectors
> “When will the internet bubble burst?” the cover story of Barron’s asked on March 20 2000. “That unpleasant popping sound is likely to be heard before the end of this year.”
Again—the internet was a bubble, and yet it eventually far surpassed even the frothiest expectations.
If you're investing for the short-term, do what you gotta do. The AI bubble will burst and lots of superficial companies will be washed away. But we're just getting started. This next wave will make a new round of companies like Netflix, Amazon, Apple, etc.
Again—the internet was a bubble, and yet it eventually far surpassed even the frothiest expectations.
If you're investing for the short-term, do what you gotta do. The AI bubble will burst and lots of superficial companies will be washed away. But we're just getting started. This next wave will make a new round of companies like Netflix, Amazon, Apple, etc.
If your portfolio of 100 internet companies in 2000 included 99 that went under and AMZN, you'd still be well above water after many years of being below water.
The problem today is that essentially nobody IPO's anymore so it's basically impossible to own 100 AI companies to ensure you include the next AMZN. NVDA is likely the CSCO of AI companies, but what's the AMZN?
The problem today is that essentially nobody IPO's anymore so it's basically impossible to own 100 AI companies to ensure you include the next AMZN. NVDA is likely the CSCO of AI companies, but what's the AMZN?
[deleted]
The internet as a platform or network survived, but most of the big players in the bubble went down. Only the veeeeery big ones survived due to enough residual funds and the smaller players that didn't have a big enough claim yet.
Exactly—it's going to be the same this time. That's how bubbles do.
What I'm trying to express is that when people say "AI is a bubble," the don't understand that AI will actually survive that bubble, even if many "AI companies" do not.
What I'm trying to express is that when people say "AI is a bubble," the don't understand that AI will actually survive that bubble, even if many "AI companies" do not.
I don't think so. Most companies that went under in the 90's bubble are definitely not doing well today. Lycos? The stuff that survived was 99% stuff that didn't have to rely on the bubble to begin with. MS or Oracle were doing fine even with the bubble bursting because their core business was not relying on it. But if the AI bubble burst, the AI shops are gonna go bye bye.
If you read my comment, I agree with you; the AI bubble is going to burst, and AI companies will go out of business. And yet, AI will be more important than ever 10-15 years from now.
Just because the bubble is going to burst does not mean the technology will go away. That didn't happen to the internet, and it won't happen to AI.
Just because the bubble is going to burst does not mean the technology will go away. That didn't happen to the internet, and it won't happen to AI.
[dupe]
Discussions:
Tech, chip stock sell-off continues as AI bubble fears mount
https://news.ycombinator.com/item?id=44965187
Is the A.I. Sell-Off the Start of Something Bigger?
https://news.ycombinator.com/item?id=44963715
Say farewell to the AI bubble, and get ready for the crash
https://news.ycombinator.com/item?id=44964548
Discussions:
Tech, chip stock sell-off continues as AI bubble fears mount
https://news.ycombinator.com/item?id=44965187
Is the A.I. Sell-Off the Start of Something Bigger?
https://news.ycombinator.com/item?id=44963715
Say farewell to the AI bubble, and get ready for the crash
https://news.ycombinator.com/item?id=44964548
The article claims that:
a) AI is a bubble
b) It's about to burst
This is based on a study that "just 5pc of integrated AI pilots are extracting millions in value, while the vast majority remain stuck with no measurable P&L [profit and loss] impact".
I think the conclusions (while possibly true) are not supported here. By comparison, in the stock market in general, just a handful of stocks provide most of the returns over the past few decades. This does not mean the stock market is a bubble or about to burst.
a) AI is a bubble
b) It's about to burst
This is based on a study that "just 5pc of integrated AI pilots are extracting millions in value, while the vast majority remain stuck with no measurable P&L [profit and loss] impact".
I think the conclusions (while possibly true) are not supported here. By comparison, in the stock market in general, just a handful of stocks provide most of the returns over the past few decades. This does not mean the stock market is a bubble or about to burst.
You have LinkedIn lunatics saying exactly this for years, AI startups are a money printer, that we're months away from AGI that gives drop in 1000x (or even infinite asymptotic) return. Adding 'AI' to your name bumps your valuation even if it is Actually Indians behind the scenes. THAT bubble needs to burst.
Article talks about "AI" as a buzzword. My understanding is that "AI" here means something much more closer to "market virtue signalling" when every product now has "AI", rather than "cutting-edge ML research".
It's the kind of "AI" I see when I walk by the TVs at Costco and see that every box that used to feature the word "smart" now has "AI" prominently written on it, even though in practice no one knows for sure what it possibly means or does. In this sense - sense of companies slapping "AI" (whatever it means to them) for the sake of having "AI" looks like a bubble/fad/hype.
I have no idea about any possible economical outcomes of that hype declining (for a better term than "bubble" "bursting"), but I'm skeptical it's gonna be anything huge. My whole life I've seen endless examples of companies realizing their "hot topic" marketing strategy stopped working (or never worked at all) and they just pivot for different strategies without any severe impacts. As long, of course, as the company had actually useful product and the issue was merely with the marketing.
It's the kind of "AI" I see when I walk by the TVs at Costco and see that every box that used to feature the word "smart" now has "AI" prominently written on it, even though in practice no one knows for sure what it possibly means or does. In this sense - sense of companies slapping "AI" (whatever it means to them) for the sake of having "AI" looks like a bubble/fad/hype.
I have no idea about any possible economical outcomes of that hype declining (for a better term than "bubble" "bursting"), but I'm skeptical it's gonna be anything huge. My whole life I've seen endless examples of companies realizing their "hot topic" marketing strategy stopped working (or never worked at all) and they just pivot for different strategies without any severe impacts. As long, of course, as the company had actually useful product and the issue was merely with the marketing.
The stock market has been a bubble since the 90’s but the bursts have been minimal because the elite class uses the stock market to extract wealth from normal people. Once they find something new (enshittification) they will suck all the value out of the market and leave its husk to peasants and their meager 401ks (if they even have that). I say this because there are so many millionaires in the US, and we can’t have too many people with extra wealth or it ruins things for the elite. The 0.01% must extract every penny from the 10%, too. It used to be every millionaire felt entitled to be a billionaire, but now centibillionaires feel entitled to be trillionaires and who do you think that money is stolen from?
If you get your information from a sad rag like the Telegraph, then you deserve what you receive. :)
It'll burst in the same way crypto burst. The NFTs and the shitcoins and the grifters and the bandwagon hoppers all got washed out, but Bitcoin is still hitting record highs today.
All the smaller AI companies will have to quickly figure out a way to make a profit, or die.
The behemoths and the ones backed by behemoths (Google, Microsoft/OpenAI, Meta, Amazon/Anthropic) will take a good hit but will power through.
All the smaller AI companies will have to quickly figure out a way to make a profit, or die.
The behemoths and the ones backed by behemoths (Google, Microsoft/OpenAI, Meta, Amazon/Anthropic) will take a good hit but will power through.
Bubbles burst when the media and public are finally bought in that they burst. This article is a good sign we aren’t there yet.
The fact that we’re talking about warning signs the bubble is about to burst indicates the bubble is not about to burst lol.
Lol, your kind of comment was also common in 2006-2007 when warnings about a housing bubble were brewing, no one can time it but the signs are always there in retrospect.
I think the biggest sign of a potential crash is that Meta has frozen AI hiring. Such a quick reversal from just a few months ago.
The reports of Meta's hiring freeze may be somewhat exaggerated
https://www.tipranks.com/news/meta-poaches-another-apple-emp...
https://www.tipranks.com/news/meta-poaches-another-apple-emp...
To be fair, it would be surprising if the supply of AI researchers worth hiring (or poaching with Mega Millions comp packages) lasted that long, either.
There has to be a point of diminishing returns somewhere, and a headline-worthy hiring frenzy should be expected to hit it quickly.
There has to be a point of diminishing returns somewhere, and a headline-worthy hiring frenzy should be expected to hit it quickly.
All you have to do for next 3 years is just put blinkers on and remain laser focussed. Ignore everything they throw at you and remain committed in this once in a life opportunity to be part of the movement that will change the world.
That sounds less like a business plan and more like a cult.
Which cryptocurrency did you lose you shirt on?
What do I do after I have my blinkers on?
Stopper your ears and scream "NAHNAHNAH".