Is the AI Bubble Real? Evidence From Both Sides

When Jim Rickards says the AI bubble is real, he is not just expressing an opinion. He points to specific data: the AI bubble is now 17 times larger than the dotcom bubble in dollar terms. Three-quarters of gains in the S&P 500 since the launch of ChatGPT came from AI-related stocks, according to JP Morgan’s Chair of Investment Strategy. AI expenditures accounted for 92% of GDP growth. Without AI-driven gains, the S&P 500 would be worth roughly half what it is today.

The scale of the AI bubble is staggering. Rickards cites JP Morgan’s Chair of Investment Strategy, who noted that three-quarters of gains in the S&P 500 since the launch of ChatGPT came from AI-related stocks. Without those AI-driven gains, the S&P 500 would be worth roughly half what it is today. AI expenditures accounted for 92% of GDP growth, meaning AI-related spending now contributes more to the nation’s GDP growth than all consumer spending combined.

Nvidia, which designs the advanced chips at the heart of the AI boom, became the first company in history worth $5 trillion. That single stock represents almost 20% of all U.S. GDP. As Rickards points out, Nvidia does not even manufacture its own chips. Taiwan Semiconductor and other manufacturers build them. Nvidia just draws up the designs.

The cash burn situation is equally alarming. OpenAI is losing more than a billion dollars a month. For every dollar the company makes, it spends at least three. Deutsche Bank estimates OpenAI will need to accumulate $143 billion in negative cash flow before making a single dollar in profit. A Deutsche Bank analyst noted: No startup in history has operated with losses on anything approaching this scale.

Despite this, OpenAI plans to IPO for nearly a trillion dollars. Sam Altman, OpenAI’s CEO, once admitted: I have no idea how we are going to generate revenue. Anthropic, another major AI lab, has warned its business could go bankrupt if AI growth forecasts are off by just one year. Elon Musk’s xAI was burning through cash so fast it had to be merged with SpaceX to keep it from going under.

Rickards also points to extreme valuations. Rickards singles out Palantir (PLTR) as a particularly egregious example of AI overvaluation. The company has a P/E ratio of 222, which means that if you bought this stock today it would take 222 years at its current earnings to make your money back. He also points to AI startups with no products and no revenue that are supposedly worth a billion dollars, and notes that tech-sector valuations are now well above dotcom era levels.

Not everyone agrees with the bubble thesis, of course. AI proponents point to genuine productivity gains, enterprise adoption, and revenue growth at companies like Microsoft and Google. The technology is real, and it is already changing how millions of people work. Rickards himself acknowledges this: “You may think we are living in a new paradigm and this technology is going to change the world. And you are exactly right. This technology is important. It will change the world. But that doesn’t mean it’s not a bubble.”

The point is that during the dotcom era, the internet was also real technology that changed the world. Pets.com, eToys, and Webvan were not fictional businesses. But they were terrible investments. The technology being real does not mean the valuations are justified.

Some of the most successful investors in the world are already exiting AI stocks. Stanley Druckenmiller, who predicted the 2008 financial crisis, has sold all his Nvidia and Palantir shares. Peter Thiel, a techno-optimist and venture capitalist, sold his entire Nvidia stake. Michael Burry made a $1.1 billion bet against AI. Paul Tudor Jones has said this is so much more potentially explosive than 1999. Jeremy Grantham, who once managed over $118 billion in assets, stated: This is obviously a bubble. The probabilities it doesn’t bust are slim to none. Former SEC Chairman Gary Gensler said AI will be the center of the future financial crisis. Even Sam Altman has admitted: A lot of people are going to lose a phenomenal amount of money.

Rickards offers a fallback that is worth noting: “And even if I’m wrong, well, that’s the best part. I think you’ll still make very good gains. Even if the AI bubble collapse looks more like a correction than a crash, you’ll still be set up to do very, very well.”

The AI Black Paper presentation promotes Strategic Intelligence, Rickards’ monthly newsletter from Paradigm Press. The price is $49 for 6 months, originally $299, an 83% discount that works out to about $8 per month. The guarantee is 3 months: subscribers can request a full refund for any reason within that window and keep all reports.

The package includes six months of Strategic Intelligence plus six special reports: AI Fallout (the biggest AI losers to remove from your portfolio immediately), The AI Black Paper Blueprint (his personal million-dollar roadmap), AI Meltdown Insurance (how to profit from the coming crash), Trump’s AI Arsenal (how investing in AI superweapons could turn $1,000 into $162,000), The Perfect Physical Gold Portfolio, and How to Make Your Home Your Personal Fortress.

Where to Learn More

For the complete analysis, read our AI Black Paper review covering Jim Rickards’ full thesis on the AI Minsky Moment.

Learn more about the AI Minsky Moment framework in our dedicated explainer.

Read our deep dive on circular financing in AI for the full Lucent comparison.

Ready to explore Jim Rickards’ full research? Learn more about Strategic Intelligence here.

This is not financial advice. Always do your own research before investing.