Warnings about the overinflated prospects of a still-hypothetical “AI economy” continue to mount. Some analysts expect the AI bubble to burst sooner rather than later, arguing that current investment growth cannot continue indefinitely in a finite world.
According to a research note recently sent to clients by Deutsche Bank, the AI boom is currently helping the US economy avoid a recession but it cannot continue indefinitely. George Saravelos, Global Head of FX Research at Deutsche Bank, said the US would be close to a recession this year if Big Tech were not spending so heavily on building new AI data centers.
The “AI machines” are literally saving the US economy right now, Saravelos said, but this kind of growth cannot be sustained unless spending remains on an ever-growing course. Nvidia, the major supplier of powerful AI accelerators used in data centers, could potentially bear much of the residual growth the US economy has experienced in recent months.
“The bad news is that in order for the tech cycle to continue contributing to GDP growth, capital investment needs to remain parabolic. This is highly unlikely,” Saravelos said.
Around half of the market gains captured by the S&P 500 index have been driven by tech-related stocks, Deutsche Bank warns. A separate report by Torsten Sløk of Apollo Management concurs, noting that equity investors are “dramatically overexposed” to AI investments.
According to analysts at Bain & Co., even with all this spending, AI is likely to generate insufficient revenue to fund further growth initiatives. By 2030, anticipated demand for AI services would require $2 trillion in annual revenues, leaving a shortfall of $800 billion globally to meet that demand.
Will AI capital expenditure continue to surge with staggering figures and impossibly high revenue expectations? Baidu CEO Robin Li recently predicted that 99 percent of so-called AI companies will not survive the bubble, while legitimate businesses are now squandering money and potential productivity gains in an attempt to turn everything into an AI workload.
Well, there is AI capex from big tech such as Google and Microsoft. And that’s why they’re pushing AI into their products also eyeing government contracts to ensure a steady flow of moneys into their pockets.
If people stop using their AI, it will be bad for them and the US economy…
Like… no. Two issues to address; first, what is AI? and second, what is an economy?
No it wont. Not if, and of course this is a big if, AI is a job deleting machine.
And even then, lets say the whole thing is a shiny boondoggle (which is more likely), its net neutral at best.
So if AI is what they claim it is, its a bad thing to introduce to your economy because it necessarily reduces economic activity.
Second, if it DOES hurt, their stock price, that means fuck all when the actual real amount of economic activity their company does is fractional relative to the valuation.