Whether you use AI in your personal life or not, there is no longer any escaping the grasp of the industry’s tendrils. There are multiple trillions of dollars now resting on AI’s success, much of it bound up in speculative debt. As everybody knows, debt is only an issue if you can’t pay it off — and as top AI labs fail to bring in enough revenue to cover skyrocketing costs, alarms are blaring that the entire global Jenga tower could soon topple.
As a new analysis by the DC-based think tank OpenMarkets concludes, this debt trap means that the “odds of a deep and severe AI crash are rapidly increasing.”
The report, cheerfully titled “Brace For Impact,” looks at the long-running and somehow still-disputed narrative around the AI bubble. As the researchers at OpenMarkets write, the interconnected and highly-concentrated nature of the speculative AI gold rush carries profound risks for the rest of the tech industry — and indeed, the economy writ-large.
“If the AI industry can’t pay back its mounting debts,” the report warns, a “financial crash could follow — and it could spread well beyond the tech sector.”
Though the researchers found that the current financial situation is “unique in recent history in its size, scope, and risk,” they note eerie similarities to the subprime mortgage crisis of 2008.
With financiers desperate to keep AI labs afloat, the report argues that “speculative data center debt is being repackaged and sold to pension and retirement funds, university endowments, and other institutional investors in a manner eerily reminiscent of the subprime bubble.”
As reckless AI spending has grown, OpenMarkets observes, president Trump and his lackeys have taken to aggressively tearing any regulations out of the walls. This may be keeping the bubble afloat in the short-term, but in doing so, it makes the consequences of any crash that much worse.
The “Trump administration and federal financial regulators are ripping up regulatory guardrails and exacerbating the harms a potential crisis would cause,” OpenMarkets continues. “Regulators, Congress, and state policymakers should instead act swiftly to shine a light on the AI industry’s murky finances, stop contributing to the inflation of the bubble with subsidies and regulatory giveaways, better protect working people’s retirement savings from outsized risk exposure, and strengthen the resilience of the financial system to protect households’ economic security and the broader economy’s stability.”
More on AI: Top Economist Finds That AI Has Provided “Zero Financial Payoff” to Companies Outside Tech
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