I keep hearing that phrase. "The AI bubble is going to burst" but...
What does it means? What impact will that have for regular people? Will it truly happen? What does needs to happen for it to burst?
I only want apps to stop embedding any for of AI as a new function, hate it
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We’re obviously still in the growth stage (data centers yet to be built out) but at some point all the AI-optimizable industries will be saturated, and we’ll be left with some very high multiple of excess AI businesses and idle compute.
There’ll be a latent period where the major players BS their earnings and usage through (more) circular business deals, consolidation, and outright misrepresentations of user data to kick the can down the road.
And then we of course will be left with the collapse, and the bag being held by pension funds (via SPVs) and the general populous (via destroyed aquifers and sky high electricity prices).
My guess is 3-4 years.
During the 2008 financial crisis the housing bubble burst because of mortgages to unqualified borrowers, complex financial products like mortgage-backed securities (MBS), and lax lending standards. So, a faulty system depending on we, the people, paying off mortgages and loans that were not being paid back. Seems a logical cause for a bubble to burst.
Before, the dotcom bubble bursted because of extreme overvaluation of companies, which were not performing up to the expectations, so the revenue wasn't there.
Now there is obviously an AI bubble as has been pointed out many many times, but currently the companies involved are still meeting their expected revenue goals (looking at NVIDIA, Meta, Google even though that is not strictly an AI-related company, their current valuation is also due to their AI developments). Of course, investing in each other and buying each other's products, causing stocks to rise, is super inflatory, but is not punished so far. It seems.
Now, a geopolitical conflict involving a certain chipmaker to not be able to produce would likely pop the bubble overnight. Given the current geopolitical situation and the people involved, this is not unlikely in the coming years. But as long as this doesn't happen it appears to be business as usual, and the AI-race will continue.
Now, comparing this to earlier bubbles, the pattern is similar. An industry is pumped to the moon, a bunch of people make an insane amount of money, the bubble bursts and most people get screwed over with a few winners. The question is always: how high will it go when the companies are profitable and how deep will the lows be?
As a retail investor who is not trading daily, this situation is extremely difficult and hard to predict when also just having a regular 9 to 5 job. I know I won't be able to predict it, so it is a risk analysis whether the current valuations will be the future lows OR if big companies with PE ratios of 50 are already a selling sign for the retail investor. This would even apply to ETFs like VWRL, since their share of NVDA is also high. The whole market will likely go down when this bubble bursts, just some companies more than others. given earlier arguments, I feel like going short here is stupid. Thereby, world governments are hedging inflation (buying loads of gold), which also has geopolitical implications. Now I believe in the mantra that time in the market beats timing the market but probably needing the money in 3 years or so, the current situation is a spicy sauce. It seems like hedging inflation (e.g. buying gold and funds like Berkshire) is not a bad move.
I read a lot of posts convinced that the AI bubble is going to pop and will result in data centres and all the money invested will become wasted.
I think these types of people are only using Chatgpt to ask it about the weather. I don't believe they are involved in anything that actually uses AI in business or functionality.
If you are a coder, you fully well know this technology is not going anywhere. It is far too useful. Getting it to analyze codebases, throwing 20 documents at it to analyze and build something out of it. Then you have all the industries it helps, example legal, customer service, art design etc.
We cannot get enough compute at the moment, AI models are always being quantized and compressed to make them more efficient because it is far to costly to run at full power.
Not to mention robots on the horizon and all the chip and ai requirements they will have.
You might get some AI companies going bust due to competition, but the demand will be transferred to another company.
It is the next industrial revolution. You see the uproar when Chatgpt goes down.
EDIT:
As others have siad we have two definitions of the AI bubble
People that think AI is going away and artists will be back in employment in pre 2020 numbers. I've seen many posts like this in some art focused reddits.
The AI companies financial status. What could actually disrupt this biggly is imagine a super model, like how Deepseek sometimes throws a spanner in the works, if a model can exist to be crazy efficient and we can get SOTA performance on regular gpus?
(Note the flair: Humour on the weekend. Please don’t read, if you are easily triggered. too late!
Sam Altman says he’s ‘0%’ excited to be CEO of a public company as OpenAI drops hints about an IPO: ‘In some ways I think it’d be really annoying’
December 19, 2025, 12:38 PM ET
OpenAI may be building up to one of the largest initial public offerings ever, but CEO Sam Altman says he is not necessarily looking forward to helming a public company.
“Am I excited to be a public company CEO? 0%,” Altman said in an episode of the “Big Technology Podcast” published on Thursday. “Am I excited for OpenAI to be a public company? In some ways, I am, and in some ways I think it’d be really annoying.”
OpenAI is laying the groundwork for an IPO, with a Thursday report from The Wall Street Journal putting early talks of a valuation at $830 billion. In a more lofty estimate, the company could be valued at up to $1 trillion, Reuters reported in October, citing three sources. According to the Reuters report, chief financial officer Sarah Friar is eyeing a 2027 listing, with a potential IPO filing in late 2026.
Altman told “Big Technology” he didn’t know if his AI company would go public next year and was mum on details about fundraising, or the company’s valuation. OpenAI did not respond to Fortune’s request for comment.
Despite his hesitance to lead a public company—which are often under more scrutiny, greater regulatory oversight, and are associated with less influence from founders—OpenAI’s IPO wouldn’t be all bad, Altman noted.
“I do think it’s cool that public markets get to participate in value creation,” he said. “And in some sense, we will be very late to go public if you look at any previous company. It’s wonderful to be a private company. We need lots of capital. We’re going to cross all of the shareholder limits and stuff at some point.”
An IPO would pave the way for OpenAI to raise the billions of dollars needed to compete in the AI race. Founded as a nonprofit in 2015, OpenAI just completed a complex restructuring in October that converted it into a more traditional for-profit company, giving the nonprofit controlling the company a $130 billion stake in it. The restructuring also gave Microsoft a reduced 27% stake in the company, as well as increased research access, while simultaneously freeing up OpenAI to make deals with other cloud-computing partners.
More ‘code reds’ to come
OpenAI’s urgency to compete with rivals was apparent earlier this month when Altman declared a “code red” in an internal memo, following the surge of interest after Google rolled out its new Gemini 3 model in just one day, which the company said was the fastest deployment of a model into Google Search. Altman’s “code red” was an eight-week mandate to redouble OpenAI’s own efforts while temporarily postponing other initiatives, such as advertising and expanding e-commerce offerings.
The blitz appears to be paying off: Last week, OpenAI launched its new GPT-5.2 model, and earlier this week, it released a new image-generation model to compete with Google’s Nano Banana. Fidji Simo, OpenAI’s CEO of applications, said the update wasn’t in response to Google’s Gemini 3, but that the extra resources from the code red did help expedite its debut.
As OpenAI tries to address slowing user growth and retain and grow market share from its competitors, Altman conceded a code red will not be a one-off phenomenon. The all-out effort is a model that’s been employed by Google, and also Meta through Facebook’s more extreme “lockdown” periods. He downplayed the stakes of a code red, matching what sources told Fortune equated to a focused, but not panicked, office environment.
“I think that it’s good to be paranoid and act quickly when a potential competitive threat emerges,” Altman said. “This happened to us in the past. That happened earlier this year with DeepSeek. And there was a code red back then, too.”
Altman likened the urgency of a code red to the beginning of a pandemic, where action taken at the beginning, more so than actions taken later, have an outsized impact on an outcome. He expected code reds will be a norm as the company hopes to gain distance from the likes of Google and DeepSeek.
“My guess is we’ll be doing these once, maybe twice a year, for a long time, and that’s part of really just making sure that we win in our space,” Altman said. “A lot of other companies will do great too, and I’m happy for them.”
https://fortune.com/2025/12/19/sam-altman-0-percent-excited-ceo-of-public-company-openai-ipo/
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I've been told by friends and family about how AI is the future, blah blah, all that stuff. I'm just a final year student, who never really thought much about it. I mean, I'll use a chatbot once in a while when I'm stuck or need quick answers / idea generation, but that barely scratches the surface. I don't have too much interest in AI as a career. I would like to go into software development after graduation, maybe I'll return to the place I interned at (software company).
The thing is, if this AI bubble, thats become the biggest thing in tech right now really does pop. I'm not entirely sure on the effect it has on me, and what I can do about it.
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