Predictions indicate the AI bubble could burst or face a major correction between 2026 and 2027, as high infrastructure costs clash with low, slow-growing returns. While some analysts suggest a correction is already underway, others, including Benchmark’s Bill Gurley, anticipate a reset due to unsustainable investment.
Key Factors and Predictions:
Timeline: Many expect a significant market adjustment within 2–3 years (by 2027), with some predicting a crash as early as 2026.Root Causes: The bubble is fueled by immense capital expenditures on data centers—expected to exceed $1 trillion by 2028—and potentially low demand or slow adoption.
Profitability Concerns: Many AI companies currently burn cash, and it remains to be seen if they can survive without subsidized token costs.
Market Sentiment: According to a Polymarket poll, a significant number of traders are betting on a correction by the end of 2026.
If the expected high returns from AI fail to materialize by early 2027, a severe correction could follow, similar to past technology bubbles. However, a potential “soft landing” could occur if AI adoption slowly matures over decades.
Tag: Economics
The AI Bubble – Price to Earnings Ratio, History
Kai Ryssdal
A huge chunk of the S&P gains of late have come because of the hundreds of billions that are being invested in Artificial Intelligence. So, bearing in mind that the average p/e ratio on the S&P right now is 25, price to earnings ratio, what does that tell us?Michelle Lowry
People have very optimistic expectations of how fast these AI companies are going to grow, into the future.John Steinsson
There are kind of two episodes in the past where the price to earnings ration has shot up to really high levels. One was right before the great depression. One was in the late 1990’s, during the internet bubble.
What’s a price-earnings ratio anyway?
Kai explains the P/E ratio of the S&P 500, which is higher that it’s been since the early 2000s.
Marketplace – Nov 12, 2025
Note – transcription approximate, done by hand, not ai.
I Know a Guy Economy
The stock market is unique – it cannot be indicted, arrested or deported
Thinking about this quote, from JPMorgan’s Michael Cembalist, today:
http://www.jpmorgan.com/insights/out…— Catherine Rampell (@crampell.bsky.social) April 3, 2025 at 5:08 PM
By Michael Cembalest
The stock market is unique – it cannot be indicted, arrested or deported; it cannot be intimidated, threatened or bullied; it has no gender, ethnicity or religion; it cannot be fired, furloughed or defunded; it cannot be primaried before the next midterm elections and it cannot be seized, nationalized or invaded. It’s the ultimate voting machine, reflecting prospects for earnings growth, stability, liquidity, inflation, taxation and predictable rule of law.
https://www.jpmorgan.com/insights/outlook/market-outlook/eye-on-the-market-fifty-days-of-grey
DotCom Bubble – 25 Years Since Peak
The dotcom era was a wild ride. When the NASDAQ peaked on March 10, 2000, it was double its value of a year before. Historically, it takes seven years for a market to double in value on average. So to say the dotcom era was overheated is an understatement.
And it’s a misnomer to call it a boom. In a boom, someone’s actually making money. Amazon didn’t have a profitable quarter until Q4 of 2001, and it was a modest profit of $5 million. It didn’t have a profitable year until 2003. Google was more promising, as it was turning profits before its IPO.
But Google was the exception. A company didn’t have to be profitable for its stock to boom. Netscape was the poster child for this. It created a necessary product, but Marc Andreessen and Jim Clark couldn’t figure out how to make it profitable. Andreessen is only rich today because he and Clark managed to convince AOL to pay $10 billion for the company before they could finish running it into the ground. Transmeta was another example of a company with interesting technology but no profits. Competing with Intel wasn’t any easier during the dotcom bubble than it was in the years right before it.
The stereotypical dotcom business model went something like this: Find something nobody’s selling on the Internet. Register a domain name. Start selling that product on the Internet. Then wait for profits to happen like magic. And without a solid business plan that included things like logistics, those profits rarely happened and typically weren’t sustainable when they did. Just like in any other business. But since this was the Internet, it was going to be different this time, somehow.
When the dotcom bubble burst
Dave Farquhar
Health Care Reform Attempt – $7.50 Shot vs $75 Shot
Gruber: Yeah, that’s a great question. And I think that, ultimately, it’s providers. First of all, if I was the health-care czar, I wouldn’t just pay what Europe pays. I would do a study of what’s the value of a hip replacement, and I’d pay according to that study. Answer one. Answer two is, who’s going to scream? It’s going to be providers, in particular the specialists and the hospitals. And let me tell you a story that illustrates that, Derek. If you get a shot, a drug injected at the doctor—not one you buy at the pharmacy, but an injectable drug, like for cancer, at the doctor—the way the government reimburses you under Medicare, that’s our universal coverage for the elderly, is the doctor gets paid 7.5 percent of the cost of the drug.
So if I give you a shot, Derek, that costs $100, I get $7.50. If I give you a shot that costs $1,000, same effort, same risk of carpal tunnel, I get $75. That’s stupid. That makes no sense. So 20 senators wrote a letter to President Obama saying, “Look, the system’s broken, we should fix it.” So President Obama and his advisers came up with a new system where doctors would largely be paid a flat amount per shot. Budget neutral. We paid the same amount of money to doctors in total, but you get a flat amount per shot. Shortly thereafter, 80 senators, including most of the original 20, wrote a letter to him saying, “How dare you propose this radical revitalization American health care? You must stop this at once. It’s socialism.”
What happened? Well, the oncologists, the cancer doctors, are the ones that give the $1,000 shots, and they got upset and they lobbied. That is the challenge, Derek.
Why American Health Care Is a “Broken System”
plain-english-with-derek-thompson
Ex Cons and the Workplace – JP Morgan CEO Wants More Opportunity
One in three American adults — more than 70 million people — have some type of criminal record. To put this in perspective, about the same number of Americans have college degrees right now.
Unfortunately, these Americans, who were incarcerated or have a conviction on their record, are essentially unable to secure good jobs in this country. Nearly half of formerly incarcerated people are unemployed one year after leaving prison. That is a moral outrage.
This group is ready to work and deserves a second chance — an opportunity to fill the millions of job openings across the country. Yet our criminal justice system continues to block them from doing so.
If You Paid Your Debt to Society, You Should Be Allowed to Work
Jamie Dimon
NYTIMES
Couple Numbers Pertaining to Inequality
By the start of 2021, the richest 1% of Americans held 32% of the nation’s wealth, its highest level since these records began in 1989.
The bottom 50%, meanwhile, held just 2% of the nation’s wealth.
Only the Rich Could Love This Economic Recovery
Karen Petrou
CEO Pay over the Years
When I graduated college in 1968, the typical corporate CEO got 20 times the pay of the average worker.
When I became labor secretary in 1993, the ratio was 61-to-1.
Today, the ratio is 320-to-1.
Capitalism is off the rails.
— Robert Reich (@RBReich) February 25, 2021
WTF is School Lunch Debt?
xXx69TwatSlayer69xXx
What the fuck is lunch debt?
DespressoCafe
Just what you think it is.
You buy food at school, if you can’t you get debt.
reach a certain threshold and you can only get a PB&J or some shit. nothing else
Thetallerestpaul
Fucking hell. Free school meals was massive when I was growing up. It’s a social mobility issue as well. Poorly fed kids can’t concentrate, fall further behind and the cycle of being poor and staying poor continues. Breakfast clubs are now in a lot of UK schools so they kids that need it are able to get at least 2 meals. Not sure how lockdown changes that, but when the first lockdown was announced a lot of teachers I know’s first concern was a load of kids aren’t gonna eat now. And aren’t going to be seen by a responsible adult for months. Heart breaking.
But lunch debt is taking it to a whole other level.
Agreeable_Arrival_87
Fun Story: One school was literally threatening to put children into foster care if their families didn’t pay off their lunch debt so a CEO offered to pay off the families’ debts for them and the school told him no.
https://www.cnn.com/2019/07/24/us/pennsylvania-lunch-debt-offer-trnd/index.html
Another Fun Story: Lunch workers who take pity on children and feed them free meals because a lot of food ends up getting thrown out at the end of the day anyway? Those people are routinely fired.
Hard Times – Eviction and Unemployment
CYNTHIA: About the end of February, close to March, they laid us off because of the pandemic. And during…
CAMP: She was surviving. And then this pandemic, by no fault of her own, took her job away, took away her ability to pay her rent.
CYNTHIA: They laid us off. They sent the letters, saying, sign up for employment.
CAMP: She struggled to apply for unemployment benefits.
CYNTHIA: So I signed up for unemployment. I didn’t get unemployment till four for five months.
CAMP: And in fact, through the better part of last summer, she did not even receive unemployment.
CYNTHIA: I’m trying to find a place to live. I can’t find nothing. I can’t find another job. I’ve been looking and looking. It’s been a whole year now – you know, going on a year. I still can’t find anything.
SHAPIRO: We’re not using Cynthia’s last name because she doesn’t want this story to affect her future ability to find a place to live. She’s 52 and lives in the St. Louis area with her two adult kids, who’ve also struggled to find work, and her 8-year-old grandson. They’re all in a house where she owes about a year of back rent. There is sewage backing up in the pipes, and the landlord wants them to leave.
CYNTHIA: And I know these people want us out of this house. I want to be out of here just as bad they want us out ’cause I’m not like that, not paying my bills and don’t want to pay. I want to pay.
General Strike in India
In late November, what may have been the single largest protest in human history took place in India, as tens of thousands of farmers marched to the capital to protest proposed new legislation and upward of 250 million people around the subcontinent participated in a 24-hour general strike in solidarity. This massive people’s movement has gained attention worldwide and, moreover, forced the government to come meet the protesters where they are instead of just cracking down and brutalizing them, a first in the six years of Prime Minister Narendra Modi’s rule.
NITISH PAHWA,
India Just Had the Biggest Protest in World History
Slate
Opinion | Stocks Are Soaring. So Is Misery. – The New York Times
So big tech stocks — and the people who own them — are riding high because investors believe that they’ll do very well in the long run. The depressed economy hardly matters.
Unfortunately, ordinary Americans get very little of their income from capital gains, and can’t live on rosy projections about their future prospects. Telling your landlord not to worry about your current inability to pay rent, because you’ll surely have a great job five years from now, will get you nowhere — or, more accurately, will get you kicked out of your apartment and put on the street.
From the comments:
Mickey NY Aug. 20 Times Pick
It’s sad really, this free market worship. No investment in post secondary education affordability in the rust belt, no investment in infrastructure during the often bragged about this period of Wall Street record setting, no bipartisan long-term game plan for preparing and training citizens of this nation for 21st century skills. And the environment seems to go the opposite of record Wall Street numbers. Red states need to look in the mirror and ask themselves about how giving tax cuts to billionaires and building 3 miles of walls is working out.
Paul Krugman commented August 21
@Mickey
Prediction: almost nobody will look in the mirror. A sad reality I’ve learned over the years is that almost nobody ever admits having been wrong about anything.
https://www.nytimes.com/2020/08/20/opinion/stock-market-unemployment.html
Crises in Lebanon
A currency collapse is raising prices for everything and an overall economic collapse is making imported meat soar to about $25 a pound, driving Lebanese to the brink.
“Some people perceive bartering as a terrible thing, using it to explain how desperate we are… No, Lebanese are not poor, they are generous people who need to maintain their dignity,” “Lebanon barters” creator told Hassan Hasna.
“A Lebanese person would say: ‘Yes, the economic situation is tough, and the situation is deteriorating but it doesn’t mean I want to humiliate myself and beg. I am willing to barter a piece of clothing in exchange for bread.’ I am proud of such people. They’re doing the impossible to survive and live with dignity.”
Tom Colicchio Spent 19 Years Building a Restaurant Empire. Coronavirus Gutted It in a Month.
What it’s like to lay off nearly 300 employees—and rethink unchecked capitalism
Now New York is facing another unthinkable catastrophe — this time, along with the entire world — and the restaurant industry is threatened as never before. Last week, Danny Meyer, Colicchio’s one-time partner, shut down all 19 of his storied establishments, laying off 2,000 people — some 80% of his workforce. Thomas Keller furloughed 1,200. And Colicchio has done the same, laying off all but a few of his 300 employees.
Recognizing an existential crisis for his industry — with many other sectors of the economy sure to follow — Colicchio has turned his attention to defending independent restaurants and their 11 million employees around the country from total devastation.
Aaron Gell talking with Tom Colicchio, March 27 2020
Medium