Is AI investing in a bubble? That is a question that Wall Street and Main Street are asking. Lots of money will be spent on AI. Analysts at J.P. Morgan estimate that up to $5 trillion will be spent by 2030 just on AI infrastructure.

We have seen financial bubbles before with everything from trains to the Internet. Some see a significant comparison to the dot-com bubble that burst in the late 1990s. That depends on when you start. If you say the Internet bubble began with the Netscape IPO and the AI bubble began with the release of ChatGPT, you do see a similarity. But critics say that this time tech companies are generating profits.

Another question is whether AI provides as much benefit as AI proponents claim. The National Bureau of Economic Research discovered that 90 percent of executives reported zero measurable impact on labor productivity or employment from AI over the prior three years. 

Public sentiment is another issue. Gen Z students use AI tools while in college. Yet those same Gen Z students have booed tech CEOs giving commencement speeches the minute they mention AI. These graduates most likely fear that AI will be used to justify mass layoffs and eliminate entry-level positions. 

Others fear that we may see something reminiscent of 2008 when the government back stopped banks though what has become known as “privatized profits, socialized losses.” Government leaders (from Bernie Sanders to Donald Trump) have talked about the federal government taking a stake in AI companies. These would then be listed as “too big to fail.”

Lots of money may be flowing into AI, but it may become a huge financial bubble.