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Is AI ready to pop?

Hands up everyone who remembers the great dot-com bubble?

Yes, whenever you have a nascent technology that promises to change the world and bring unprecedented wealth to those who embrace its benefits, bubbles can form.

So it is with artificial intelligence.

Gobsmackingly large sums of money (three quarters of a trillion USD according to Gemini) have been invested in developing AI systems to date -- with a whole lot more in the pipeline as investors seek to cash in on what is "the next big thing".

Just like the late 1990s when people could see that the internet was going to be huge, people are throwing money at anything that carries a whiff of AI in its prospectus or title.

With all this money flowing like water, plenty of AI startups are installing water-features in the lobby of their expensive offices and the directors of those companies are constantly checking out their Lambo dealers for trade-up options.

The promises made for AI are huge and, at least to some degree, it seems to be delivering.

Countless careers are being derailed by as AI muscles-in on professions and vocations that were once considered safe bastions that would always provide employment for those with the right skills.

At one stage we all thought that computers might be able to replace accountants and engineers but they'd never usurp the human mind when it came to the arts. However, it is now the music, movie and other artistic sectors that appear to be under the greatest threat from AI.

I don't think anyone would have seen that coming just a few short years ago.

The problem is that although there's a snot-load of money being poured into these AI-based enterprises, just as back in the 1990s, not many of them are actually providing a return to their shareholders; yet.

There can be no doubt that AI is here to stay and that it will form a crucial element of our world moving forward but even though the same was clearly true of the internet back in 2000, the bubble still burst, with devastating results for those who were over-leveraged or who backed the wrong horse.

Right now, talk on the street is that the AI bubble is due to burst pretty soon so should we be worried? What would be the fallout and the implications for regular folk if/when that bubble does go pop?

According to what I've read, there are a lot of critical dependencies within the AI industry right now. This means that it would only take one of those dependencies to fail and the effects could ripple through the entire sector like a force 9 earthquake. There is a tension building and, just like with toughened glass, a single crack could see the whole thing shatter into a million pieces.

With AMD, an AI chip-maker, taking a stake in OpenAI their fortunes become linked and NVIDIA taking a shareholding in Intel it's becoming clear that anything that adversely impacts just one of the players in this industry is going to impact them all.

Let's also not forget that there are troubling geopolitical tensions at work, with Donald Trump announcing a punitive 100 percent *extra* tariff on Chinese-made products as a reaction to that country's tightening of exports containing rare-earth metals.

When you add the increasing rise of authoritarianism in democratic nations such as the UK, Canada, Australia and elsewhere it becomes obvious that the world is not in a comfortable place right now. It wouldn't take much to ignite this tinderbox.

It is perhaps for these reasons that we've seen gold soar to new record high prices, as growing numbers of people opt to invest in the safety of that metal rather than speculative ventures or assets that would be far more vulnerable to rogue governments and their wealth taxes.

Even crypto took a bit of a tumble over the weekend although it remains surprisingly resilient.

So what if the AI bubble does burst?

Well I suspect a lot of AI-based startups will go bust when it comes time to go looking for their next round of funding. That will see a glut of second-hand water-features and Lambos on the market as well as a bunch of AI IT professionals scrounging to find jobs as cleaners and Uber drivers.

Some high net worth individuals may take a hammering if they're heavily invested in those startups but the savvy ones will be able to fall back on their gold reserves, which are doing very nicely thank you.

Just as it was in 2000, the world will not end, even if some companies and indivuals face financial ruin. Nor will AI disappear, it has proven itself to be a very useful technology even in its current form.

The growth of AI, as a technology and as an industry will however, slow significantly.

With investors demanding a return on their investments, AI companies will have to turn their focus to generating revenues and profits rather than open-ended research and development. Sadly, this will likely make AI less accessible to the man in the street. Free AI chatbots may go the way of the dodo I'm afraid.

As a wise person once said, the only constant is change -- so yet again, perhaps for a record time this year, I grab my popcorn, sit back and watch.

Carpe Diem folks!

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