Like me, Garran pointed to the efficient compute frontier and the diminishing returns of AI, causing costs to skyrocket and progress to stagnate. This is why ChatGPT-3 cost $50 million, ChatGPT-4 cost $500 million, and ChatGPT-5 cost $5 billion, yet the improvement between these generations has been so slim it is almost unnoticeable. This wouldn’t be a problem if these AIs had reached a point of usefulness, but they haven’t. Like me, Garran points to the plethora of studies that prove AI deployments offer practically no benefit, aren’t profitable, and actually make companies less efficient. As such, the AI industry and the gargantuan investment behind it are a dead end, creating a bubble. … Their solution has been to raise debt in secret. Dario Perkins, managing director of global macro at TS Lombard, has found that many AI companies are increasingly using SPVs to raise significant amounts of debt financing off the books. This covers their tracks and obfuscates the debt, making it “look” like the company is running on equity finance instead. Due to this, it is incredibly difficult to get an accurate figure on how much of the AI industry’s expenditure and growth comes from debt — but we know it is a lot! … When this pops, OpenAI, Nvidia, Microsoft, Tesla, and others could easily face total collapse. They flew too close to the sun, but as their charred bodies crash down, they will land on others and destroy them too. Major banks, pension funds, and the loan market could face complete collapse or near-fatal damage.
So we all agree we’re in a. bubble got it. but the reality is big tech has been sitting on billions in a war chest. I dont know that I agree with the bodies falling from the sky. Even if this all fails spectacularly Wall Street has a well worn playbook to get government (ie us taxpayers) to foot the bill at the alter of we can’t let the system explode.
But if you go to AI companies right now they’ll tell you the LAST thing we need are regulations.. Sigh. The millenial experience has been a crash ever 2-5 years. So I suppose I do agree with his final point. The storm is on the horizon.
Quote Citation: Will Lockett, “The AI Bubble Is Far Worse Than We Thought”, 2025-03-18, https://www.planetearthandbeyond.co/p/the-ai-bubble-is-far-worse-than-we