--- title: "Alarms Blaring That AI Bubble Could Collapse" description: "The performance of a key stock index mirrors how it performed before the Dot-com recession, suggesting that the AI industry is a bubble." date: "2024-12-06" modified: "2024-12-06" authors: - name: "Frank Landymore" job_title: "Contributing Writer" link: "https://futurism.com/authors/flandymore" url: "https://futurism.com/the-byte/alarms-ai-bubble" categories: - "Artificial Intelligence" tags: - "ai bubble" - "generative ai" - "the digest" --- # Alarms Blaring That AI Bubble Could Collapse ![The performance of a key stock index mirrors how it performed before the Dot-com recession, suggesting that the AI industry is a bubble.]() *\Image: Getty / Futurism\* ## Wake Up Call If something seems too good to be true, it probably is. You might apply this truism to the AI industry, which many experts have warned is a massive [bubble on the verge of bursting](). It's easy to ignore those warnings, though, when the bubble just keeps getting bigger in the meantime. This staggering growth is exemplified by the S&P 500, an index tracking the largest five hundred companies listed on the US stock exchange, often considered a reliable barometer of the growth of the economy. As the [*Associated Press* reports](), the S&P 500 is now trending to finish 2024 with a staggering gain of nearly 27 percent. But heed this: that's off the back of a just over 24 percent spike the year before — a back-to-back run that the *AP* notes hasn't been seen since the catastrophic Dot-com bubble of the late 90s. ## Tragedy Turned Farce That is not an auspicious parallel. After hitting a temporary peak in 1998, the S&P 500 would continue to balloon for a few more years. But by early 2001, the bubble had popped, plunging the US economy into a lengthy recession. That isn't the only parallel, of course. The Dot-com bubble and our current AI one [have an eerie amount in common](). Both were predicated on feverish hype for a new form of transformational digital technology. Then it was the internet. Now it's generative AI. Each seemingly promised limitless possibilities and thereby limitless profits. But so far, all AI seems *really* good for is making inferior versions of human art and drafting emails and hallucinating a lot. And like with the Dot-com bubble, [profitability remains elusive](). No one has figured out how to legitimately make money with this stuff yet. ## The Bank Job As such, [sane economists]() have often pushed back [against the breathless hype]() that the AI industry gets. Recently, so has the European Central Bank, which is basically the European Union equivalent to the US Federal Reserve. Per [*Reuters*](), the ECB warned last month of a "bubble" in AI stocks, that, "in a context of deeply integrated global equity markets," it said in its biannual Financial Stability Review, "points to the risk of adverse global spillovers, should earnings expectations for these firms be disappointed." In other words, investors are going to panic if AI doesn't start printing money soon — and the ensuing ramifications could echo in economies the world over. **More on AI:** *[What the Company With the Highest Stock Gain From AI Actually Does Is Extremely Grim]()* ## Author At Futurism, my work has often centered on bringing a sense of clarity and insight to complex topics ranging from the regulation of emerging technologies to the esoteric ideologies of Silicon Valley executives, while striving not to lose the poetic sense of awe inspired by often-obscure fields like astrophysics and quantum computing. I broke the story of CNET using AI to produce articles that turned out to be riddled with factual errors and plagiarism — a dam-breaking inflection point, as I've reported, that's inspired copycats and endless discourse while beguiling stakeholders ranging from tech giants to purveyors of spam around the web. My work at Futurism has been cited by publications including CBS News, the Los Angeles Times, Vice, Gizmodo, Engadget, the Verge, and Vanity Fair. I grew up in locales ranging from India to China, and now live in the exotic suburbs of Virginia. In my free time, I'm an avid reader of weird sci-fi literature, an aficionado of East Asian cinema, and, regrettably, a relapsed gamer. Allegedly, I’m working on a debut novel, currently untitled. ### Author social links [Bluesky]()