An industry-wide push to responsibly slow its advancement, and apocalyptic warnings from some of the technology’s leading developers, have dampened enthusiasm for artificial intelligence and raised concerns that one of its long-feared economic consequences—the AI bubble “bursting”—could be here. Last week, Anthropic CEO Dario Amodei said unconstrained advancements risk rogue AI “swarms” capable of “taking over the entire internet” within a year, causing “catastrophic damage” that could total hundreds of billions of dollars. He proposed a plan, titled “pacing the frontier," which pushes for progress while ensuring adequate safeguards are put in place, and called on governments and fellow developers to pledge their commitment.
This came after former developers, notably former Anthropic researcher Jacob Coxon, warned that AI systems could pose an existential threat to the human race. Prominent tech figures, including Elon Musk and former Google DeepMind CEO Demis Hassabis, have since echoed Amodei's calls, as has OpenAI CEO Sam Altman, who said those pioneering the tech “could lose control of the future to AI.” Amid these warnings, AI-related equities have come under pressure across markets in Asia, Europe and the United States, linked to fears that a coming development slowdown could further postpone the so-far illusory returns on the staggering investments made in the technology. Broadly, the AI “bubble” has come to describe the potential disconnect between the enthusiasm surrounding AI and the technology’s ability to deliver the revolutionary profitability investors expect.
Like the Dot-Com bubble of the late 1990s, experts have said the sizable gains made by AI-linked stocks are not justified by current revenues or business models, evidence of what former Federal Reserve Chairman Alan Greenspan dubbed “irrational exuberance” in the market. AI-related firms have become a significant driver of market gains in recent years, while their associated infrastructure plays an increasingly central role in the U.S. economy, meaning that a sudden correction or “bursting” of this bubble could have economy-wide consequences. And while leading voices in the AI space have long advocated for responsible advancement, the consensus that appears to be forming is one of responsible development that experts say may have spooked investors.
In an interview with Fortune, published Saturday, Altman said OpenAI would be pushing back its plans to go public until at least 2027. These factors appear to have taken some wind out of the sails of AI-linked equities in Asia, Europe and the U.S. on Monday. As of noon ET, chipmaker Nvidia had fallen about 3 percent, with Intel down more than 5 percent, while in Tokyo, SoftBank—a major stakeholder in OpenAI—had fallen 10.7 percent by the closing bell.
But despite the heavy losses, economists and scholars of past financial “bubbles” say the selloff does not yet signal the mass-market correction many fear. William Quinn, a financial historian and co-author of Boom and Bust: A Global History of Financial Bubbles, told Newsweek that the current market panic could also be fueled by the possibility of rising global interest rates. Quinn said that a decline in AI-linked stock prices, while rare, is not the “same thing as a bubble bursting,” and that these have for the most part risen in tandem with actual earnings.
The market could be wrong about that,” he said, “but it's not the type of thinking that we usually associate with a bubble.” “One bad morning does not mean the AI bubble has burst,” said Arold. However, he added that this, if sustained, "could mark the start of a broader correction in A.I. stock prices” if the high valuations and investments currently enjoyed by AI firms fail to “translate into equally enormous profits.” “If revenues and productivity gains fall short of expectations while those costs rise, stock prices could have much further to fall, even if AI itself proves transformative,” he told Newsweek. Contact Newsweek editors on this story: Ben Kelly and Sam Wilson.
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