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23. July 2025
Experts Warn Of Ai Bubble Threatening Global Economy
The AI Bubble: A Growing Concern Among Economists
Apollo Global Management’s chief economist, Torsten Slok, has sounded the alarm on a growing concern in the technology sector: the AI bubble. The current surge in growth, driven by rapid advancements in artificial intelligence (AI), has led to widespread overpromising and exaggeration. This, according to Slok, is not a coincidence but rather a clear indication that the market is experiencing a bubble.
To understand the severity of the situation, let’s examine the price-to-earnings (P/E) ratios of the top 10 companies in the S&P 500 compared to the rest of the index. The chart illustrates that the P/E ratio has continued to creep higher over the last five years, far surpassing the rates seen during the dot-com era. This indicates that these top 10 companies are significantly overvalued relative to their earnings.
The root cause of this bubble is the enormous hype surrounding AI technology. Tech titans like Nvidia, Microsoft, Apple, Amazon, Meta, and Alphabet have made massive investments in AI research and development, with some spending billions of dollars on building out infrastructure. However, despite these significant expenditures, earnings are still lagging far behind.
Investors are willing to overlook the lack of concrete earnings growth in favor of the promise of future profits. This has led to a market frenzy, with AI stocks experiencing unprecedented price appreciation. However, as Slok’s warning suggests, this could ultimately be a recipe for disaster.
The comparison between the current AI bubble and the dot-com era is apt. Just as the late 1990s saw a speculative bubble build up around internet stocks, the AI industry has become increasingly detached from reality. Many analysts have warned about the risks of overinvesting in unproven tech, but their warnings have fallen on deaf ears.
AI critic Ed Zitron has also drawn comparisons between the current situation and the subprime mortgage crisis of 2007. Both crises saw investors becoming overly optimistic about the potential for new technologies to revolutionize industries, only to be met with catastrophic consequences.
A recent demonstration by a Chinese AI company called DeepSeek that its AI chatbot could trade blows with large language models from major tech companies like OpenAI, Meta, and Google sent shockwaves through the industry. The massive selloff in AI stocks that followed this event was a stark reminder of the risks involved in the current market frenzy.
Despite the significant investment being made into AI research and development, there is still much to be done to reassure investors that their bets will pay off. According to an S&P Global research note published in June, the generative AI market is projected to grow at a breakneck pace, reaching an aggregate revenue of $85 billion by 2029. However, when compared to the tens of billions of dollars being spent on capital expenditures by tech companies this year alone, it’s clear that there is still much work to be done.
The AI bubble is not just a minor concern; it’s a full-blown crisis that requires immediate attention from investors and policymakers alike. As the market continues to experience a speculative frenzy driven by hype and overpromising, the risk of a major crash grows exponentially. It’s time for economists like Slok to sound the alarm and urge caution, lest we see a repeat of one of the biggest stock market crashes in history.
The industry’s impact on society, from job displacement to increased productivity, is still being debated among experts. As the market continues to experience a speculative frenzy driven by overpromising and exaggeration, it’s essential that we consider the broader implications of this bubble and take steps to mitigate its risks.
Ultimately, the AI bubble is a cautionary tale about the dangers of unchecked speculation and the importance of investing in proven technologies. As we move forward into an increasingly complex and rapidly evolving technological landscape, it’s essential that we prioritize prudence and caution over hype and enthusiasm. Only by taking a critical eye to the current market frenzy can we hope to avoid a repeat of the devastating consequences seen during the dot-com era.
The AI industry is at a crossroads, with two possible paths unfolding before it. The first path is one of continued speculation and frenzy, driven by hype and overpromising. This path is fraught with risk and could lead to catastrophic consequences for investors and policymakers alike. Alternatively, the AI industry can choose a more prudent approach, focusing on proven technologies and delivering tangible value to customers.
As we move forward into an increasingly complex and rapidly evolving technological landscape, it’s essential that we prioritize prudence and caution over hype and enthusiasm. Only by taking a critical eye to the current market frenzy can we hope to avoid a repeat of the devastating consequences seen during the dot-com era.
The AI bubble is not just a minor concern; it’s a ticking time bomb waiting to unleash chaos on the markets. As economists, policymakers, and investors, it’s our responsibility to sound the alarm and urge caution, lest we see a repeat of one of the biggest stock market crashes in history.
In conclusion, the AI industry must take steps to mitigate its risks and prioritize prudence over hype and enthusiasm. By doing so, we can hope to avoid a repeat of the devastating consequences seen during the dot-com era and ensure that the benefits of AI are realized in a responsible and sustainable manner.