‘Yes, AI Is a Bubble. There Is No Question.’
‘Yes, AI Is a Bubble. There Is No Question.’
https://www.derekthompson.org/p/yes-ai-is-a-bubble-there-is-no-question
Publish Date: 2026-03-18 06:01:00
Source Domain: www.derekthompson.org
Here’s a summary of the article using an unordered list containing 6 key points:
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AI Spending and Predictions: It’s projected that private sector spending on AI in 2026 will exceed $700 billion, surpassing the combined peak spending on historical major projects like the 1930s public works, Manhattan Project, 1940s electricity, Apollo Project, and Interstate Highways.
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Historical Context and Uncertainty: The unprecedented nature of AI spending raises questions about its future trajectory. The article emphasizes that this spending trend has no past precedent and it’s challenging to predict outcomes given AI’s current novelty.
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Carlota Perez’s Framework: An initial belief that AI spending would lead to an economic bubble due to rapid growth in spending outpacing revenue was initially dominant, aligning with Carlota Perez’s insights that general-purpose technologies often create economic bubbles before achieving technological revolution.
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Recent Revenue Surge: However, recent developments like AI agents from Anthropic and OpenAI have demonstrated significant revenue growth, challenging the bubble prediction and suggesting a closer match between AI development spending and revenue generation.
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Paul Kedrosky’s Perspective: Paul Kedrosky maintains that AI still represents a bubble, characterized by excessive infrastructure spending similar to historical events like railroads, leading to overbuilding and financial distress, mirroring earlier experiences and underlining the risk of economic crises.
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Implications and Rational Bubbles: Kedrosky argues that this bubble stems from rational behaviors across multiple sectors (loose credit, tech, real estate, government policy) leading to an economically unsustainable level of investment and a potential future reset similar to past bubbles.
