AI bubble

The AI bubble is a theorised stock market bubble growing amid the current AI boom, a period of rapid progression in artificial intelligence (AI) that is affecting the broader economy.^[1][2][3] Speculation about a bubble largely originates from concerns that leading AI tech firms are involved in a circular flow of investments that are artificially inflating the value of their stocks.

Background

This paragraph is an excerpt from AI boom.[edit]

An AI boom^[4][5] is a period of rapid growth in the field of artificial intelligence (AI). The current boom is an ongoing period that originally started from 2010 to 2016,^[6] but saw increased acceleration in the 2020s. Examples include generative AI technologies, such as large language models and AI image generators by companies like OpenAI, as well as scientific advances, such as protein folding prediction led by Google DeepMind. This period is sometimes referred to as an AI spring, to contrast it with previous AI winters.^[7][8] As of 2025, ChatGPT is the 5th most visited website globally behind Google, YouTube, Facebook, and Instagram.^[9][10]

Statistics

The number of Google searches for the term "AI" accelerated.

In late January 2025, the unexpectedly successful launch of the Chinese-made chatbot DeepSeek resulted in concerns about a possible AI bubble. The stock prices of many AI companies dropped, such as Nvidia's shares dropping 17% in one day. Nvidia's share price recovered 8.8% the following day.^[11] In August 2025, a report by the Massachusetts Institute of Technology stated "despite US$30–40bn in enterprise investment into Gen[erative]AI, [...] 95% of organisations are getting zero return".^[12] Spending from US mega caps is expected to reach $1.1 trillion between 2026 and 2029, and total AI spending is expected to surpass $1.6 trillion.^[13]

Due to the growing demand for computer chips to sustain AI technologies, Nvidia became the highest valued company in the world and the first to ever have reached a market value of $4 trillion in July. The figure had quadrupled since 2023, when it surpassed $1 trillion. The company's value made up roughly 7.3% of the S&P 500, which hit an all-time high.^[14][15] In October 2025, the company's value grew beyond $5 trillion,^[16] rising higher than the GDP of every country except for the US and China, according to data from the World Bank. Over the year 2025, AI-related enterprises accounted for roughly 80% of gains in the American stock market. Some sceptics warned that the rapid rise of AI tech firms may be the result of excessive financial engineering.^[17]

Microsoft disclosed that it had spent almost $35 billion on AI infrastructure in the three months leading up to the end of September. In October, it became the second most valuable company in the world largely due to its 27% stake in OpenAI. While seeing increases in revenue by 18% and in net income by 12%, share values dropped by 4% in after-hours trading amid investors' concerns about the possible costs of sustaining the AI boom.^[18]

In late 2025, 30% of the US S&P 500 and 20% of the MSCI World index was solely held up by the five largest companies, which was the greatest concentration in half a century, and share valuations were reportedly the most stretched since the dot-com bubble.^[19][20] Experts warned that AI companies were extremely overvalued, with the S&P 500 trading at 23 times forward earnings, and the FTSE Index trading at 14 times, showing how expensive the US market had become. The Case–Shiller price-to-earnings ratio for the US market also exceeded 40 for the first time since the dot-com crash.^[20]

Speculation

Sam Altman, CEO of OpenAI and creator of ChatGPT, stated in 2025 that he believed that an AI bubble is ongoing.^[21] In early 2025, Bridgewater Associates co-investment officer Ray Dalio said that the current levels of investment in AI are "very similar" to the dot-com bubble.^[21]

In September 2025, the Australian Financial Review said that "If we really are in another share-market bubble, it's surely the most anticipated example in history."^[22] In October of that year, Jamie Dimon, head of JP Morgan, the largest bank in the US, said he thinks "AI is real" but said he believes some money invested now will be wasted. He also said there is a higher chance of a meaningful drop in stocks over the following two years than the market was reflecting.^[23]

Dimon warned that an AI-driven stock crash could result in a lot of invested money being lost, although he acknowledged that AI "[would] pay off […] just like cars in total paid off, and TVs in total paid off, but most people involved in them didn't do well". However, he further stated on AI that "the level of uncertainty should be higher in most people's minds".^[24]

Circular financing

See also: Round-tripping (finance)

Bubble graphics depicting circular investments by AI companies became popular in October 2025.^[25][26] Some speculators have questioned the investment structure of the AI industry due to profitability and cash flow issues for major AI companies.^[27]

Concerns were raised that leading AI tech firms were using circular financing and investment to artificially boost their valuations. In September, Nvidia made a $100 billion investment into OpenAI, expanding the pre-existing stake that it held in the company. This agreement was made on the expectation that OpenAI would power additional data centres using the chips that it had been buying from Nvidia, establishing a circular flow of money.^[28]

In October, OpenAI purchased billions of dollars worth of electronics from AMD, a rival of Nvidia, to supply its development of AI in an agreement that made it one of the largest shareholders in the company. Microsoft also held a large stake in OpenAI, and Oracle Corporation, a computing company, also entered into a $300 billion deal with the company.^[28]

Bank of England statement

The Bank of England warned of the growing risks of a global market correction due to a possible overvaluation of leading AI tech firms in the stock market, such as OpenAI, which more than tripled its value from $157 billion in October 2024 to $500 billion the following year. These valuations, they claimed, could be further harmed if the infrastructure requirements for sustaining the technology were too high to be met. They added that investors were not properly cautioned about the risks of a stock market crash were AI to fall short of market expectations.^[29]

The International Monetary Fund agreed with and reinforced the bank's claims. Kristalina Georgieva, a Bulgarian economist and the 12th managing director of the IMF, also drew comparisons to the dot-com bubble of 2001, highlighting that a market correction could stunt global growth and weaken the economies of developing countries.^[19]

Opposing views

A Goldman Sachs chief equity strategist believes the rapid increase in stock valuations is likely justified by powerful and sustained profit growth. Goldman also noted that valuations for the large US growth stocks that led the market higher in the bull market since October 2022 are modest compared to the dot-com bubble.^[30]

Morgan Stanley pointed out that the median cash flow for the top 500 companies in the US is roughly triple what it was in 1999 and that firms' margin profiles are much more robust now.^[31][32]

Current US chair of the Federal Reserve Jerome Powell has stated that AI differs from other technology bubbles like the dot-com bubble in that the corporations behind it are generating large amounts of revenue and that investment into AI data centres is generating large amounts of economic growth.^[33]

See also

• Cryptocurrency bubble – Speculative bubble involving cryptocurrency prices