Is the AI Bubble Going to Burst? Numbers for AI Skeptics

Is the AI Bubble Going to Burst?

None of the sources cited below can say when, or whether, the artificial intelligence (AI) bubble will burst. The Bank of England and the International Monetary Fund (IMF) both warn of a possible AI-led market correction. Several bubble signals are on the record: spending far ahead of revenue, circular deals and stretched valuations.

For readers who doubt the AI boom, each signal below comes with its source.

Who Is Warning

Asked whether investors as a whole are overexcited about AI, Sam Altman, chief executive of OpenAI, said: "My opinion is yes." He said it at a dinner with reporters in mid-August 2025, as The Verge first reported. He also called AI "the most important thing to happen in a very long time."

Entrepreneur, citing CNBC, reported that Altman called some startup valuations "insane." Fortune noted that OpenAI had just raised $8.3 billion at a $300 billion valuation.

Ray Dalio, founder of Bridgewater, described markets as a "classic bubble" close to bursting, Semafor reported on October 7, 2026. Temasek's chief investment officer, whom the article does not name, called an unwinding of the AI trade "the biggest risk to markets in 2027."

Joachim Klement of Panmure Liberum spoke on October 9, 2026. "My core conviction is that the AI bubble will either burst in 2027 or in 2028, so sometime in the next two years," he said. He set a year-end 2027 target of 5,000 for the S&P 500, about 36 percent below current levels. Bloomberg's seven other tracked strategists average 14 percent upside, according to Bloomberg, as carried by Insurance Journal.

Jefferies strategist Chris Wood warned of "massive capital destruction."

In its October 2026 Global Financial Stability Report, the IMF said that faltering AI investment and profitability "could challenge optimistic expectations." The Bank of England's Financial Policy Committee said in October 2025 that equity valuations "appear stretched," particularly for technology companies focused on AI. It also said "the risk of a sharp market correction has increased."

Who Disagrees

Jensen Huang, chief executive of Nvidia, addressed the bubble talk on the company's November 19, 2025 earnings call. "There's been a lot of talk about an AI bubble," he said. "From our vantage point, we see something very different."

Nvidia reported third-quarter revenue of $57.01 billion for fiscal 2026 and guided to $64 billion for the fourth quarter, plus or minus 2 percent. Chief financial officer Colette Kress cited visibility to $500 billion in Blackwell and Rubin chip revenue through calendar 2026.

Huang also said OpenAI "is likely going to be the next multi-trillion-dollar hyperscale company," as The Register reported.

The IMF's January 2026 estimate of US overvaluation, set out in the dot-com comparison below, is the main institutional counterpoint.

The Warning Signs, With Sources

For project failure rates, see our guide to whether AI is overhyped.

Spending Far Ahead of Revenue

The four biggest spenders plan more than $700 billion of capital spending in 2026. After first-quarter 2026 earnings, Alphabet forecast $180 billion to $190 billion, and Amazon kept its forecast at $200 billion. Microsoft put its figure at $190 billion for this calendar year, and Meta forecast $125 billion to $145 billion.

Sherwood News said the combined total was nearly double what the four companies spent last year. Bloomberg Intelligence estimated that hyperscalers' data-center capital spending could more than double from the 2025 level to $713 billion in 2026. It expects a further rise in 2027, at a slower pace.

OpenAI's Internal Forecasts

The Decoder reported in February 2026 on internal OpenAI documents obtained by The Information. The documents put OpenAI's 2025 revenue at $13.1 billion. They forecast $30 billion for 2026 and about $62 billion for 2027.

The same documents forecast cash burn of $8 billion in 2025, $25 billion in 2026, $57 billion in 2027, $85 billion in 2028 and $51 billion in 2029. They forecast positive cash flow of $39 billion in 2030, the first positive year. The same documents put total spending on training and running AI models at $665 billion. Training alone is projected at nearly $440 billion through 2030.

Sam Altman said OpenAI expects to spend "trillions of dollars" on data-center buildout in the "not very distant future." Fortune quoted him in August 2025.

A 2024 Revenue Test

In June 2024, David Cahn, a partner at Sequoia Capital, argued that AI needed about $600 billion a year in revenue to justify the chip and data-center spending then planned. He called it "AI's $600B question," up from a "$200B question" a year earlier.

His method doubled Nvidia's data-center revenue to reach total data-center cost, then doubled it again for a 50 percent gross margin for the end user. His question was "Where is all the revenue?"

Cahn's estimate is from 2024, and the spending it measured has grown since then.

A Revenue Report That Moved Markets

Euronews reported that the Financial Times said on October 8, 2026 that OpenAI's annualized revenue was "approaching $50 billion" at the end of September, based on figures shared with investors. That was about $20 billion below a roughly $70 billion figure circulating the month before.

Euronews explained that the $70 billion was an investor estimate that also counted cloud platform sales. It was not an OpenAI forecast. Euronews said: "The gap does not mean OpenAI missed a target or lost sales."

That day the Nasdaq Composite fell 1.25 percent to about 27,193, and the Philadelphia Semiconductor Index fell 3.4 percent. Oracle dropped 5.5 percent, CoreWeave nearly 8 percent, Nvidia almost 3 percent and AMD about 4 percent.

SoftBank, which owns about 13 percent of OpenAI, fell as much as 7.3 percent in Tokyo the next day before paring losses. Futures rebounded on October 9.

Circular Deals

Circular deals are arrangements in which the same companies invest in, lend to and buy from each other. The IMF reviewed 14 such transactions since 2023. It found about $300 billion in equity investments and $650 billion in debt, given in exchange for $1.4 trillion in future revenue commitments.

The IMF warned that "stress at key companies receiving investment would lower revenue forecasts and investment valuations."

Nvidia and OpenAI

Nvidia's September 2025 announcement described plans to invest up to $100 billion in OpenAI, invested progressively as each gigawatt is deployed. The plan was tied to at least 10 gigawatts of Nvidia systems.

Nvidia announced the deal as a letter of intent, with details to be finalized later. The first phase was targeted for the second half of 2026.

On January 31, 2026, Bloomberg Law reported, citing the Wall Street Journal, that Nvidia's talks to invest up to $100 billion had broken down. The report said some people inside Nvidia had raised concerns. Bloomberg Law's report doesn't say whether any Nvidia investment in OpenAI went ahead.

AMD, Oracle and CoreWeave

On October 6, 2025, AMD announced that OpenAI will deploy 6 gigawatts of AMD graphics processing unit (GPU) chips. The first gigawatt, of MI450 chips, starts in the second half of 2026.

AMD gave OpenAI a warrant for up to 160 million shares of AMD common stock. The Register described that as about a 10 percent stake in AMD. The warrant vests in tranches tied to deployment milestones and to "AMD achieving certain share-price targets."

The Register reported a deal worth $300 billion over five years for cloud computing, tied to Stargate. Citing the Financial Times, it said Oracle plans to spend about $40 billion on roughly 400,000 Nvidia GB200 chips for its Abilene, Texas, data center.

The $300 billion figure comes from reporting. Oracle did not confirm the other party to the deal in the primary sources reviewed.

The $22.4 billion total for OpenAI's CoreWeave contracts is CoreWeave's own figure, as reported. The total has three parts. They are an initial contract worth up to $11.9 billion, a $4 billion expansion in May 2025 and a $6.5 billion expansion in September 2025.

One deal-tracking dataset flags the May $4 billion expansion as not verified against a primary source.

Nvidia owns more than 5 percent of CoreWeave. In September 2025, Nvidia agreed to buy $6.3 billion of CoreWeave cloud services, which The Register described as effectively guaranteeing CoreWeave's unsold GPU time.

Microsoft invested $1 billion in OpenAI in 2019 and reportedly $10 billion in early 2023. OpenAI uses Azure.

Huang defended Nvidia's investments in its customers in November 2025. He said, "We are expanding the reach of our ecosystem," and called it his "investment thesis."

Is This Like the Dot-Com Bubble?

The Bank of England and the IMF give different answers on how close today's valuations come to the dot-com peak.

The Bank of England said one valuation measure, an earnings yield, was close to its lowest level in 25 years. It called that level comparable to the peak of the dot-com bubble. The same record said the forward price-to-earnings ratio of 25 remained below dot-com levels.

The IMF's January 2026 estimate points the other way. It said potential overvaluation in the US broad equity index is only about half that of the dot-com episode.

Altman also compared the current moment to the dot-com era, as Entrepreneur and Fortune reported in August 2025.

The Register said critics "increasingly" compare the circular deal loop to the late-1990s dot-com bubble. It named no critics.

What Could Trigger a Burst

The sources name several possible triggers. None gives a date for any of them.

• Faltering AI investment and profitability. The IMF said this "could challenge optimistic expectations" and could "trigger a correction in asset prices linked to the AI industry."
• Stress at companies that receive circular investment. The IMF said that stress would lower revenue forecasts and investment valuations.
• Leverage. The IMF said "higher leverage could amplify shocks if returns fail to materialize," and that investors have been leveraging to invest in AI stocks.
• Thin cash flow at the biggest spenders. Joachim Klement said hyperscalers' free cash flows are "largely depleted."
• An unwinding of the AI trade. Temasek's chief investment officer called it "the biggest risk to markets in 2027."

What a Burst Would Mean for You

The Bank of England said any AI-led price adjustment would have "a high level of pass-through" into returns for investors exposed to the aggregate index.

J.P. Morgan Chase says investors in S&P 500 and total-market funds may hold sizable exposure to the same mega-cap names through several funds. Its article on concentration risk covers how to rebalance.

An IMF blog from January 2026 cites a downside scenario from October 2025. In that scenario, a moderate correction in AI stock valuations and tighter financial conditions cut global growth by 0.4 percent relative to the baseline.

In the first half of 2025, investment in information-processing equipment and software was 4 percent of US gross domestic product (GDP). Harvard economist Jason Furman calculated that this investment accounted for 92 percent of GDP growth in that period. Excluding it, growth would have been 0.1 percent annualized.

Furman also noted that strong GDP growth coexisted with slowing job creation. No source reviewed estimates job losses from an AI correction. For what AI is doing to jobs, see our guide to AI layoffs and why they backfire.

The IMF said stress tests show the banking sector stays resilient under a severe scenario with AI, bond-market and energy shocks. It urged limits on leverage in AI and private credit.

Electricity costs in the sources trace to the buildout itself. No source says a burst would lower or raise electricity bills. PJM's independent market monitor, Joseph Bowring, attributed $6.3 billion of the latest capacity auction's charges to data centers. That was 38 percent of $16.4 billion in charges.

Across the last four base auctions, data-center-driven charges were $29.4 billion, or 46 percent of $63.6 billion. Bowring says ratepayers pay capacity charges tied to existing and potential data centers. Utility Dive notes it is uncertain how much projected data-center load will actually materialize. For the household side, see our guide to whether data centers raise electric bills.

For data-center stocks and exchange-traded funds (ETFs), see our guide to the AI data center bubble. Next, read the Bank of England's October 2025 record for the valuation figures, then the IMF's October 2026 blog for the circular-financing totals.

Sources

• Sequoia Capital, David Cahn, "AI's $600B Question", June 2024
• Fortune, Sam Altman's OpenAI paradox, August 19, 2025
• Entrepreneur, OpenAI CEO Sam Altman on overexcited investors, August 19, 2025
• Bank of England, Financial Policy Committee Record, October 2025
• NVIDIA Newsroom, OpenAI and NVIDIA strategic partnership, September 22, 2025
• Bloomberg Law, Nvidia halts plan to invest $100 billion in OpenAI, January 31, 2026
• AMD Investor Relations, AMD and OpenAI strategic partnership, October 6, 2025
• The Register, the circular economy of AI, November 4, 2025
• Sherwood News, Alphabet, Amazon, Microsoft and Meta capital spending, April 30, 2026
• The Decoder, OpenAI cash burn forecast, February 2026
• Yahoo Finance, Nvidia CEO on AI bubble and circular investing fears, November 20, 2025
• IMF Blog, Global Financial Markets Face Rising Risks From AI, Bond Yields, and Cyberattacks, October 2026
• IMF Blog, Global Economy Shakes Off Tariff Shock Amid Tech-Driven Boom, January 19, 2026
• The Register, AI bubble could burst and take global economy with it, IMF warns, October 13, 2026
• Bloomberg via Insurance Journal, AI bubble risks worst S&P 500 crash since 2008, October 9, 2026
• Semafor via Yahoo Finance, investors warn of AI bubble, October 7, 2026
• Euronews, what happened to OpenAI's $20bn revenue scare, October 9, 2026
• Fortune, Jason Furman on data centers and GDP growth, October 7, 2025
• J.P. Morgan Chase, Concentration risk: how to rebalance
• Utility Dive, data centers and PJM capacity auction costs, July 20, 2026