Just How Bad Would an AI Bubble Be?

> The entire U.S. economy is being propped up by the promise of productivity gains that seem very far from materializing.

or, even worse perhaps the productivity gains will be high.

I'm not sure if this point is essential or pedantic, but they're not claiming that the economy is being propped up, just stock prices.

They are claiming both. Business spending on AI is more than all consumer spending combined as a share of GDP. That’s propping up the whole economy.

I don’t think its doing so much propping up because the spend is being thrown into a couple of piles. When companies hire some ai superstar for millions it isn’t like much of that money is circulating in the wider economy like if you invested it into a diversified portfolio or hired a lot of lower wage people who spend a much higher share of their paycheck on stuff that keeps it circulating in local economies. Likewise if that spend is going to server racks or electricity. The money just doesn’t have a lot of avenues to spill out into different subsets of the economy.

This is probably what is going on when we see McD executives say there are basically two economies in the US at the moment, one doing very well for itself and the other experiencing a lot of hardship.

The post talks about how a lot of AI investment could just be a waste which would be bad for the economy and stocks.

My comment is really a off-topic, its that if AI really does work well it'll put half of us out of work, leaving us to do non-knowledge work that the robots can't do yet.

We might have some reserve power generation capacity after the bubble.

>Business spending on AI is more than all consumer spending combined as a share of GDP.

Your phrasing there is misleading. The article says, "In the first half of this year, business spending on AI added more to GDP growth than all consumer spending combined," and the key is the "added more to GDP growth" part.

Growth in consumer spending was sluggish, while growth in business AI spending was insane, so in terms of how much the economy grew, the rise in AI spending exceeded the rise in consumer spending. Which is pretty amazing, actually. But, as far as the total amount of spending, business AI is at most only a few percentage points of GDP (and that's if you interpret "business AI spending" very broadly), while consumer spending is somewhere around 67-70% of GDP.

Thanks I did misunderstand that.