{"id":497610,"date":"2026-06-27T03:27:09","date_gmt":"2026-06-27T03:27:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/497610\/"},"modified":"2026-06-27T03:27:09","modified_gmt":"2026-06-27T03:27:09","slug":"we-are-in-a-bubble-experts-warn-of-historic-ai-bust-risk","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/497610\/","title":{"rendered":"‘We are in a bubble’: Experts warn of historic AI bust risk"},"content":{"rendered":"

Recent swings in tech stocks are reviving fears of an AI bubble – and some experts warn that if it pops, the fallout could be bigger than anything Wall Street has ever seen.<\/p>\n

“There are many indications that we are in a bubble,” said Itay Goldstein<\/a>, 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 – all tech giants – are worth a combined US$18 trillion (NZ$32t), 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 – 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 – recently floated by the US Federal Reserve – 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 US$25 billion (NZ$44t) in bonds, raising new doubts about its financial health.<\/p>\n

The news sent its share price lower.<\/p>\n

\"SpaceX's<\/p>\n

SpaceX announced this week it plans to issue US$25 billion in bonds.<\/p>\n

AFP \/ Ronaldo Schmeidt<\/p>\n

Analysts also warn of “circular financing” – 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

Early signs of a pop?<\/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

\"Oracle<\/p>\n

Oracle boss Larry Ellison.<\/p>\n

Photosport<\/p>\n

An unprecedented crisis<\/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 – including for everyday Americans.<\/p>\n

A huge portion of the US 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","protected":false},"excerpt":{"rendered":"Recent swings in tech stocks are reviving fears of an AI bubble – and some experts warn that…\n","protected":false},"author":2,"featured_media":497611,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,111,139,69,145],"class_list":["post-497610","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-new-zealand","tag-newzealand","tag-nz","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/497610","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=497610"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/497610\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/497611"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=497610"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=497610"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=497610"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}