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<\/p>\n WASHINGTON
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Recent swings in tech stocks are reviving fears of an AI<\/a> bubble<\/a> \u2014 and some experts warn that if it pops, the fallout could be bigger than anything Wall Street<\/a> has ever seen.<\/p>\n “There are many indications that we are in a bubble,” said Itay Goldstein, a finance professor at the University of Pennsylvania’s Wharton School.<\/p>\n “It seems likely that there is overpricing,” he added.<\/p>\n The numbers back him up. The five biggest companies on Wall Street \u2014 all tech giants \u2014 are worth a combined $18 trillion, almost the size of China’s entire economy.<\/p>\n Big tech has been pouring money into AI and now investors are getting nervous: will any of it actually pay off?<\/p>\n Six months ago, these same companies were buying back their own shares \u2014 a move that signals excess cash and drives up the stock price.<\/p>\n Now they’re taking on debt to fund their AI buildout in a significant reversal.<\/p>\n “The amount of debt that’s being taken on is still relatively modest,” said Brent Fredberg, director of investments at Brandes Investment Partners.<\/p>\n But a rise in interest rates \u2014 recently floated by the U.S. Federal Reserve \u2014 could make that borrowing a lot more painful.<\/p>\n Fresh off its blockbuster IPO, space and AI giant SpaceX announced this week it plans to issue $25 billion in bonds, raising new doubts about its financial health.<\/p>\n The news sent its share price lower.<\/p>\n Analysts also warn of “circular financing” \u2014 where big tech companies invest in AI startups, which then use that money to buy big tech’s own products and services.<\/p>\n “This can lead to problems down the road,” Fredberg said, calling out a potential house of cards.<\/p>\n Tech stocks took a beating this week, reigniting old fears about an AI meltdown.<\/p>\n But not everyone is sounding the alarm. Some say the recent selloff is just a breather after a long run-up and not the start of a real crash.<\/p>\n “The recent volatility reflects a valuation test, profit-taking and flow-driven positioning amid higher rates — not a fundamental break,” wrote Christian Stocker, a director at UniCredit, in a recent note.<\/p>\n Still, some warning signs are hard to ignore.<\/p>\n Oracle — one of the biggest names in software and cloud computing — just had its worst week since the dot-com bust of the early 2000s, with shares down 19 percent in five days.<\/p>\n For comparison: during the dot-com crash in August 2001, Oracle fell 20 percent, according to CNBC.<\/p>\n “The market is very skittish,” Fredberg said.<\/p>\n If the AI bubble does burst, the consequences could be historic.<\/p>\n “We’re talking about the biggest firms that are traded in the financial markets,” Goldstein said. “If they are taking a hit, that will certainly be felt across the board.”<\/p>\n The dot-com bust more than 25 years ago was bad — but it mostly wiped out smaller companies. A crash today would directly hit some of the largest corporations on earth.<\/p>\n Still, there is less wild speculation right now than in the late 1990s tech frenzy, Fredberg said.<\/p>\n But a severe tech crash would still send shockwaves through the whole economy \u2014 including for everyday Americans.<\/p>\n A huge portion of the U.S. population holds stocks, either directly or through retirement accounts like 401(k)s. If Wall Street tanks, so would the financial security of millions of people.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"WASHINGTON Recent swings in tech stocks are reviving fears of an AI bubble \u2014 and some experts warn…\n","protected":false},"author":2,"featured_media":88555,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[24,25,302,701],"class_list":["post-88554","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ai","tag-ai","tag-artificial-intelligence","tag-bubble","tag-wall-street"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/88554","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=88554"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/88554\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/88555"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=88554"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=88554"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=88554"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}