Former Fidelity fund manager George Noble warned that the collapse of the AI bubble could cause 17 times more damage than the dot-com collapse, which wiped about $5 trillion off the Nasdaq.
summary
- George Noble warns that an AI collapse could cause 17 times more damage than a dot-com collapse.
- Polymarket traders have raised the odds of the AI bubble bursting in 2026 to over 17%.
- Dalio and the US Treasury identify liquidity and economic linkages as key risks.
according to PolymarketHowever, the probability of the AI bubble bursting in 2026 has risen to more than 17% after recently falling from 30% to 14%. Contracts using different accuracy parameters placed the probability between 16% and 24%, as traders weighed declines in technology stocks, revenue concerns, and weakness in global markets.
Noble linked his expectations to the large sums flowing into artificial intelligence infrastructure, arguing that the financial ramifications could extend beyond technology companies if the expected returns fail to arrive.
“The implications of this could be even more significant,” Noble said while discussing the increase in capital spending on artificial intelligence.
AI bubble odds rebound above 17%
New pressure on semiconductor and technology stocks has heightened these concerns. The Wall Street Journal I mentioned U.S. stock futures fell on Thursday as AI-related anxiety spread from Asian markets, with shares of SK Hynix and Samsung Electronics falling nearly 9%.
Both South Korean chipmakers plan to spend billions of dollars on semiconductor factories and artificial intelligence capabilities. These declines came as investors questioned whether revenue generated from artificial intelligence services would justify the industry’s rising infrastructure bill, according to the report.
IBM added to the concerns after its shares suffered their biggest daily decline since 1968, falling nearly 25% earlier this week. Market data cited in the report showed that IBM closed another 2.7% lower at $211.20 on Wednesday, taking its multi-session decline to over 26%.
In it warningAI infrastructure spending is pulling corporate budgets away from software, contributing to weaker-than-expected revenue growth, IBM said. The sell-off erased tens of billions of dollars from IBM’s market value and affected other software and information technology stocks, according to the report.
US Department of the Treasury project a report He has also studied how the decline of AI could move through the economy. Drawing on research conducted by the University of Texas at Austin and cited by NOTUS, the report found that AI companies became more closely tied to the US economy than Internet companies during the dot-com era.
Under the report’s negative scenario, disappointing productivity or profits could hurt private credit, chip makers, cloud service providers, electric utilities and companies that finance data centers. The Treasury did not forecast an imminent collapse, but listed electricity shortages, financing limits, supply chain disruptions, and geopolitical tensions among the risks facing the sector.
Cash orders can reveal inflated AI valuations
Ray Dalio has Argued separately And it is liquidity, not weak technology, that can break the AI boom. During a television interview reported by Bloomberg, the Bridgewater Associates founder explained that investors often misjudge high asset values for money they can easily spend.
Dalio used private companies to illustrate the risks: A company could get a billion-dollar valuation after raising much less actual capital, but shareholders can’t use that paper wealth without selling. In his assessment, tension may arise if several investors try to convert those valuations into cash at the same time.
Bernstein and Cummings pointed to mounting pressures under the weight of the boom. In a recent Substack post, economists wrote that the AI bubble “continues to inflate,” while investment in the technology has reached nearly 5% of U.S. GDP, higher than levels recorded during the dot-com era.
Their analysis also found that big tech companies were committing enough capital to AI projects to reduce their cash reserves. Combined with Noble’s warning and Dalio’s concerns about liquidity, these numbers leave investors focusing on whether AI profits can catch up with the money already allocated to the sector.
