AI Bubble: Boom or Bust?

The current artificial intelligence boom presents a dual reality of transformative economic potential versus escalating financial risk.

While leading tech firms today possess stronger balance sheets and profitability compared to the "dot-com" era, market concentration has reached historic extremes, with the "Magnificent 7" comprising approximately 35% of the S&P 500.

Financial stability risks are rising due to "circular" financing dynamics where tech giants invest in startups that immediately recycle capital to buy the investor's hardware, and a projected $5 trillion infrastructure spend that relies heavily on debt financing.

Although optimists project AI could double US productivity growth to 1.8% annually, skeptics warn that high adjustment costs and reliability issues may limit GDP gains to a modest 1% over the next decade, creating a dangerous gap between astronomical valuations and actual economic output.