If you’ve been following tech news lately, you’ve probably noticed a growing chorus of warnings about something called an “AI bubble.” And if you’re like most people, you’re probably wondering: should I be worried? Is this the next dot-com crash waiting to happen?
Let me be straight with you—the answer isn’t simple. But after digging through expert opinions, market data, and recent developments, I can give you a clear picture of what’s actually going on and whether we should be hitting the panic button.
The Eye-Popping Numbers That Have Everyone Talking
Here’s what’s got Wall Street and Silicon Valley buzzing: tech companies are projected to spend about $400 billion this year alone on AI infrastructure. To put that in perspective, that’s equivalent to funding a new Apollo moon mission every 10 months. Think about that for a second—we’re talking about more money being poured into AI annually than what it took to put humans on the moon over an entire decade.
Nvidia became the first company ever to reach a $4 trillion market value in July, quadrupling since 2023. Just this week, Nvidia crossed the $5 trillion threshold, making it worth roughly as much as France’s and South Korea’s entire economies combined. That’s not just impressive—it’s unprecedented.
But here’s where things get weird. OpenAI’s ChatGPT, the most successful AI product out there, loses money almost every time you use it. In the first half of 2025, OpenAI took in $4.3 billion but still reported a net loss of $13.5 billion. That means they’re burning through money faster than a forest fire.
Why Smart People Are Sounding the Alarm
The concerns aren’t coming from random doomsayers—they’re coming from some of the sharpest minds in finance and technology. Goldman Sachs CEO David Solomon expects “a lot of capital that was deployed that [doesn’t] deliver returns.” Even Jeff Bezos called the current environment “kind of an industrial bubble.” And perhaps most telling, Sam Altman, CEO of OpenAI himself, warned that “people will overinvest and lose money” during this phase.
When the guy leading the AI charge is telling you people will lose money, you should probably listen.
At a Yale CEO Summit in June, 40% of over 150 top CEOs raised significant concerns about AI overinvestment, believing a correction is imminent. These aren’t pessimists or tech skeptics—these are the people running major companies who are supposedly benefiting from the AI boom.
The Circular Money Problem That Should Worry You
Here’s where things get really sketchy. Nvidia is investing $100 billion in OpenAI, while OpenAI is taking a 10% stake in AMD. Microsoft is a major shareholder in OpenAI but also a huge customer of CoreWeave, where Nvidia holds a significant stake. And Microsoft accounted for almost 20% of Nvidia’s revenue.
Let me translate: these companies are basically passing money back and forth to each other in an increasingly complex web of investments and purchases. It’s like a group of friends all lending each other money to buy each other’s products. When everyone’s propping everyone else up, what happens when one domino falls?
An analyst noted there’s evidence of circular revenue deals and very aggressive price behavior in the AI space. This is exactly the kind of behavior that preceded previous financial crashes.
The Math Just Doesn’t Add Up
The AI buildout needs about $2 trillion in annual revenue by the end of the decade to justify current and planned investment. But right now? American consumers spend only $12 billion a year on AI services—roughly the GDP of Somalia. Meanwhile, total AI spending is expected to hit $375 billion this year and reach $500 billion in 2026.
The gap between what companies are spending and what they’re earning back is astronomical. OpenAI is committed to investing $300 billion with Oracle over the next five years—that’s $60 billion per year—while only expecting to generate $13 billion in revenue in 2025. How does that make sense?
It’s like spending $60,000 a year on a car when you only make $13,000. Eventually, you run out of credit cards to max out.
The Dot-Com Déjà Vu
The share of the economy devoted to AI investment is nearly a third greater than the share devoted to internet-related investments during the dot-com bubble. That should send chills down your spine if you remember what happened in 2000.
But here’s the thing—there are also important differences. Unlike the dot-com companies that had no revenue and no business model, Federal Reserve Chair Jerome Powell noted that AI differs from other technology bubbles in that the corporations behind it are generating large amounts of revenue and that investment into AI data centers is generating significant economic growth.
Goldman Sachs points out that valuations for today’s leading tech stocks are modest compared to the dot-com bubble, with current companies showing much more robust cash flow and margin profiles.
But Wait—Not Everyone Thinks We’re Doomed
Nvidia CEO Jensen Huang said this week that demand “continues to exceed our expectations,” with the company anticipating $3 trillion to $4 trillion in annual AI infrastructure spending by the end of the decade. After Nvidia posted sales and profits up more than 60% year-over-year, Huang stated “sales are off the charts” and pushed back hard against bubble fears.
Some analysts argue the real problem isn’t speculation—it’s supply constraints. One investor emphasized “this is not the dot-com bubble, because demand is massively outpacing supply”. Companies like CoreWeave and Oracle have massive revenue backlogs—over half a trillion dollars combined—but can’t fulfill orders fast enough due to power infrastructure delays.
Think about that. These companies have customers ready to pay, but they can’t build data centers fast enough to meet demand. That’s the opposite of a traditional bubble where demand collapses.
The Reality: It’s Complicated
In late January 2025, when the Chinese chatbot DeepSeek launched successfully, Nvidia’s shares dropped 17% in one day, only to recover 8.8% the next day. This kind of volatility shows just how nervous the market is about AI valuations.
An MIT report from August 2025 stated that despite $30-40 billion in enterprise investment into generative AI, 95% of organizations are getting zero return. That’s a sobering statistic that should make any investor pause.
Meanwhile, in the first half of 2025, spending on data centers accounted for most of the economic growth in the U.S., outpacing all consumer spending combined. The AI boom is literally propping up the American economy single-handedly—at least on paper.
What This Means for Regular People
If you’re not a tech investor or venture capitalist, you might be thinking, “Why should I care?” Here’s why: when bubbles pop, they don’t just hurt the people who invested in them. They ripple through the entire economy.
JP Morgan CEO Jamie Dimon warned that an AI-driven stock crash could result in a lot of invested money being lost, though he acknowledged AI will ultimately deliver value, just like cars and TVs did—even though most companies involved didn’t do well.
In late 2025, 30% of the US S&P 500 was solely held up by five largest companies, the greatest concentration in half a century. If those companies stumble, your retirement account probably stumbles with them, even if you never bought a single tech stock directly.
Three Ways This Could All Fall Apart
According to Yale researchers, there are three main scenarios for how the AI bubble could burst:
The Domino Effect: Because of all those circular investments I mentioned earlier, if one major player fails, it could trigger a cascade of failures across the entire AI ecosystem.
The Reality Check: Companies and investors eventually realize that the promised returns aren’t materializing, leading to a sudden shift in sentiment and mass selloffs.
The Regulatory Hammer: Governments step in with regulations that fundamentally change the economics of AI development, making current business models unsustainable.
Any of these scenarios could happen tomorrow, next year, or maybe never. That’s what makes this so nerve-wracking.
So Are We in Trouble?
Here’s my honest take after looking at all this information: Yes, there are absolutely bubble characteristics in the AI market. The valuations are stretched, the circular financing is concerning, and the gap between spending and revenue is massive.
But—and this is important—AI is also genuinely transformative technology. It’s not a complete mirage like some dot-com companies were. Real products exist, real revenue is being generated, and real economic value is being created. The question isn’t whether AI is valuable; it’s whether current valuations and investment levels are sustainable.
Reports estimate that AI-related capital expenditures surpassed the U.S. consumer as the primary driver of economic growth in the first half of 2025, accounting for 1.1% of GDP growth. That’s real economic impact, even if the profits aren’t there yet.
The truth is, we might be in a bubble that eventually pops, causing real pain and real losses. But the technology itself will likely survive and eventually deliver on its promise, just like the internet did after the dot-com crash. The question is whether you want to ride out the volatility or sit on the sidelines.
Frequently Asked Questions
Q: What exactly is an AI bubble?
An AI bubble refers to a market condition where AI-related companies are trading at valuations that are significantly disconnected from their actual revenue and profitability. Currently, companies are spending hundreds of billions on AI infrastructure while generating far less in actual revenue, creating concerns about a potential market crash similar to the dot-com bubble of 2000.
Q: How big is the AI investment right now?
Tech companies are projected to spend about $400 billion on AI infrastructure in 2025, with spending expected to reach $500 billion in 2026. By the end of the decade, annual AI infrastructure spending could hit $3-4 trillion according to Nvidia’s projections. To put this in perspective, this represents more investment than the Apollo moon program, repeated every 10 months.
Q: Is the AI bubble similar to the dot-com crash?
There are similarities and differences. The share of the economy devoted to AI investment is actually about one-third greater than internet-related investments during the dot-com era. However, unlike many dot-com companies that had no revenue, today’s AI companies are generating significant revenue and economic growth, even if they’re not yet profitable.
Q: Are AI companies actually making money?
Most aren’t. OpenAI, the most successful AI company with ChatGPT, lost $13.5 billion in the first half of 2025 despite generating $4.3 billion in revenue. An MIT report found that 95% of organizations investing in generative AI are getting zero return on their investment. The gap between spending and earnings is one of the biggest red flags.
Q: Why are investors still pouring money into AI if it’s not profitable?
Investors believe AI will eventually transform the economy and generate massive returns, similar to how the internet eventually lived up to its promise despite the 2000 crash. There’s also significant momentum investing, where people buy because they think others will keep buying. Additionally, demand for AI services is currently outpacing supply, suggesting genuine market need.
Q: What are the warning signs of an AI bubble?
Key warning signs include: extreme valuations (some companies trading at 700x earnings), circular financing where companies invest in each other, massive losses despite growing revenue, companies raising billions without even explaining their product plans, and market concentration where just five companies hold 30% of the S&P 500’s value.
Q: Should I sell my tech stocks because of AI bubble fears?
This is a personal decision based on your risk tolerance and investment timeline. Many experts acknowledge bubble characteristics while still believing in AI’s long-term potential. Nvidia just posted 60%+ growth, suggesting strong fundamentals despite high valuations. Consider diversifying rather than making all-or-nothing bets either way.
Q: What happens if the AI bubble pops?
A burst could trigger significant stock market losses, particularly concentrated in tech stocks. JP Morgan CEO Jamie Dimon warned this could result in substantial invested money being lost. However, like previous tech crashes, the underlying technology would likely survive and eventually fulfill its promise, though many companies and investors would suffer losses in the short to medium term.
Q: How can I protect myself from an AI bubble burst?
Diversify your investments beyond tech stocks, maintain an emergency fund, don’t invest money you can’t afford to lose, and avoid getting caught up in hype-driven momentum investing. Monitor key metrics like price-to-earnings ratios, cash burn rates, and actual revenue versus projections. Remember that even transformative technologies can go through painful corrections before delivering long-term value.