Is The AI Bubble Going To Burst?

Introduction

Artificial Intelligence has dominated tech news for the last two years, and the announcement that several of the world’s top tech companies are launching 11-figure investment levels has done nothing to stop this almost limitless flow of news.

However, if history has taught us anything, what goes up must come down at some point. Even the internet, which has changed our lives, experienced a similar colossal rise. So, will the AI bubble burst like the dot-com bubble or the housing bubble? Let’s take a look.

Evaluating True Cost

Economists state that a bubble bursting is simply a market returning to its true form, its real value. For example, the housing market crumbling in 2008 didn’t mean that houses had no value; it’s just that their true cost had been over-inflated. While countless factors will inevitably determine the true cost of AI, for many people, true cost can be derived from provable, tangible income streams and how much money it can generate.

For instance, the casino gaming world has been able to monetize itself on several different levels through a combination of effective marketing, targeting the right audience, and understanding how people want to access their casino games—whether they play pokies on their tablet, smartphone, or desktop.

Instead of distancing itself from modern technological advantages, the casino world has leant into the positives of new tech, including AI, but more evidently with cryptocurrency. Bitcoin is starting to showcase where it can be used as a tangible asset, thus allowing Bitcoin pokies to become a small but respectable area of the casino gaming sector.

Over the next decade, as Bitcoin becomes a broader part of global economies, its true cost will be weighed up based on how it can be used for everyday products, such as pokies. At least in a true market, the idea is that the price will reflect and balance as per this demand and usefulness. While AI has oodles of both at the moment, there are already signs that this market is changing.

Defining A Burst Bubble

For those who do not have a detailed understanding of the history of the internet, particularly in the 21st century, there could be a presumption that the technology moved in an “up only” trajectory following its increasing prevalence in daily life from the mid-1990s.

Comparisons between the dotcom bubble and AI have already been circulating since the middle of last year. While the industry has continued expanding since the middle of 2024, the chances of the bubble bursting, or at least partially bursting, have increased.

Within days of the $500 billion Stargate project announcements, the emergence of DeepSeek as an open-source, more effective, and infinitely cheaper AI model sent shockwaves throughout the global stock market, with Nvidia losing over half a trillion dollars worth of stock market value in the space of four hours.

Believe it or not, retractions of this magnitude are healthy for an industry that is growing so enormously. They indicate that the US might not have the pincer-like grip on the sector it thought it did. This uncertainty, especially if AI companies overseas are able to develop AI models for a fraction of the price, will inevitably lead to less investment—and it’s this avalanche of doubt that can lead to huge bubbles appearing in the industry.

Is It Panic Stations For AI Companies?

It’s not all doom and gloom for AI – the internet has survived the dot-com bubble, and the housing market in many Western countries is doing better than ever. However, as we touched on before, the AI market may retrace to a more sensible valuation, and those companies that were late to the party, so to speak, will find themselves bearing the brunt of the impact if the market bubble bursts.

AI will be used in every facet of the tech world, including innovative ideas like smart cities and IoT, which prominent tech giants are increasingly implementing. AI usage is here to stay, and it’s highly unlikely that it has peaked in the modern market.

Final Thoughts

Investors and those in the industry might become more reluctant to invest in ideas, especially with DeepSeek and other recent revelations coming to the surface. It doesn’t mean AI is redundant or completely overrated; it just means that the trillions of dollars pouring into the sector might be premature and could result in a dot-com bubble-like scenario.

The industry will survive, and AI will transform the world as we know it, but those who are only finding out about it now or looking to make a quick buck could be playing a risky game if the bubble were to burst as it did in the housing market or the dot-com debacle of the early 2000s.

The idea of “burst” implies that the industry is worthless or built on a foundation of hot air. While there are no doubt some absolute charlatans currency operating in the world of AI who have no idea how it works, the technology is simply too innovative to be rendered redundant.

It doesn’t mean it’s not overvalued, though – and it could be a case in a year or two that the warning signs were glaringly obvious, but people were just so hellbent on making quick profits that they didn’t pay attention – where have we heard that one before?