Bluesky

The AI bubble makes the Dot Com bubble blush by comparison.

US GDP is $29 trillion. The Dot Com bubble wiped $1.78 trillion in value from the US stock market in 9 months, and had a lot of flow on effects to banking - ultimately the bubble cost about $5 trillion, had dropped the stock market 78% from its peak, and triggered a recession that lasted most of a decade.

According to leading economists, the AI bubble is 17 times larger.

I believe the AI bubble today is in many ways worse than the Dot Com bubble of the 90s because we're now so heavily reliant on technology for business, and so many major tech companies have invested heavily in AI, pretty much everyone has some exposure. A crash of the tech sector and multiple big names failing today would be just as bad economically as banks failing in the 90s.

If you think the US economy is somehow insulated by the wealth of the big tech companies.. I strongly disagree. They borrow against their stock valuation, if their price dips a lot their lenders will be looking for loans to be repaid as their collateral has decreased. They are not too big to fail and when it pops they'll cause a lasting recession.

It would be different if the rest of the US economy was booming, but all US economic gain in GDP over the last 5 years has been due to the AI bubble, take it out of the picture and you're already in a recession. Add Trump as president and a Republican-led congress defunding so many US social support institutions and you may have a depression.