AI Boom Carries Risks for US Economy

[marcus]

From https://finance.yahoo.com/economy/policy/articles/robert-rubin-warns-ai-boom-190255724.html
Title : Robert Rubin Warns AI Boom Carries Risks for US Economy, Markets
By Natalia Kniazhevich and Lisa Abramowicz , October 2026

... Rubin (Treasury chief in the late 1990s) said ... "Some of these very big AI companies have enormous commitments, and then there are a lot of suppliers, and a lot of suppliers have borrowed against those commitments," ... "What happens if they can't fulfill those commitments or all those borrowed against them? ...

He also pointed to inflation and a broader loss of confidence in the government's ability to address fiscal problems ...

Rubin pushed back against the argument that AI-driven productivity growth could allow the US to effectively grow its way out of its fiscal problems. While it's possible that a productivity acceleration boosts GDP gains, the benefits could be accompanied by substantial job losses, particularly among white-collar workers ...

Lawyers, accountants and television workers could all face displacement, he said, raising difficult questions about how people transition into new roles. The US currently lacks effective programs to deal with such disruptions, he said ...

He also questioned whether the massive investment in AI ($10.3 trillion from 2025 to 2032 - WSJ) will ultimately generate sufficient returns. "Will it pay off, will it not? ... "Some of this will turn out to be terrific and some companies will do great, and a bunch of other companies are going to do badly."

Rubin said his concerns extend beyond markets and the economy to the potential safety risks posed by increasingly powerful AI systems.

He said he sees AI safety and climate change as "2 massive existential risks" unlike anything humanity has previously faced ...

 

[marcus]

From https://finance.yahoo.com/technology/ai/articles/elon-musk-fires-back-broadcom-133013594.html
Title : Elon Musk Fires Back at Broadcom CEO Hock Tan's AI Investment Warning: 'No Crying in the Casino'
By Shomik Sen Bhattacharjee , Oct 2026

... Broadcom Inc. CEO Hock Tan told the panel that "A lot of investors have no clue what they're investing in, but set very extreme expectations, only to find out that it's almost like they are in a casino gambling".

Tan also questioned how efficiently companies are spending on AI ...

"People are just wasting money, spending tokens, trying to understand (AI)," Tan said, comparing companies to a child who burns through $10 of arcade tokens in minutes and learns nothing. (https://finance.yahoo.com/technology/ai/articles/elon-musk-takes-direct-swipe-024700291.html)

The concern has also put AI returns and capital availability in focus.

Tan's warning comes from one of the biggest beneficiaries of the AI infrastructure boom. Broadcom said fiscal 3rd-quarter AI semiconductor revenue jumped 221% year over year to $16.7 billion, while Tan expects 4th-quarter AI semiconductor revenue to reach $21.7 billion ...

The financial concern is widening. According to research published by the Brookings Institution in September, the U.S. AI infrastructure buildout is projected to reach $10.3 trillion through 2032. This investment is expected to average 3.63% of U.S. GDP annually, surpassing historical economic booms such as railroads and electrification, increasing pressure on companies to generate returns that justify enormous capital spending.

 

[pantaiema]

Well, everything in life, not just investment, carries risk.

The $10.3T figure published by the Brookings Institution, is not an annual budget commitment of hyper scalers or AI data centres companies, but it is Brookings's own assumption and projected estimate of the total cumulative spending added up over an eight-year period from 2025 through 2032.

In contrast, the total current annual spending remains below $1T. A significant portion of this immediate spending by hyperscalers and infrastructure companies is already locked in by contractual backlogs rather than pure speculation.

AI data centre infrastructure companies, hyperscalers CEOs are among the sharpest business leaders, the most intelligent people on earth that have a long standing reputation. They will not be so naive as to deploy capital without visible demand or expected revenue. In the future when the demand is easing they will simply cut their spending on AI Infrastructure.

 

[marcus]

... the most intelligent people on earth that have a long standing reputation ...

I am far from being a business specialist but from the little I know , from all these "most intelligent people on earth" lets take Elon Musk (the richest on earth) as an example : in my view his only really good & sussceful idea was the reusable rockets (part of SpaceX) . His other (probably also) good ideas (except Twitter ?) : Zip2 , Xcom , electrical vehicles/Tesla ,Twitter/X , OpenAI , XAi , Neuralink , Boring Company , didn't impress me yet . (https://en.wikipedia.org/wiki/Elon_Musk)

 

[marcus]

From https://www.techradar.com/pro/lack-...lobal-economy-if-the-ai-bubble-pops-imf-warns
Title : Lack of promised profit could tank the global economy if the AI bubble pops, IMF warns
By Craig Hale , Oct 2026

... Specifically, the IMF warned of 3 potential developments : a correction in AI-related investments and company valuations, an increase in government bond yields, or a major cyberattack targeting critical national infrastructure, including financial institutions ...

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From https://www.techradar.com/pro/ai-ha...-250-million-jobs-is-the-only-way-to-solve-it
Title : AI has a $2.5 trillion problem and replacing 250 million jobs is the only way to solve it
By Benedict Collins , Oct 2026

... New analysis by Marin Ivezic, Founder of Applied Quantum, has found that the math really isn’t adding up. In order to justify the colossal investment, AI would need to generate approximately $2.5 trillion in annual revenue ...

Optimistic estimates put AI’s current revenues at between $150 billion and $250 billion per year, which is a multi-trillion shortfall ...

This is compounded by AI models that become cheaper to use ... (GPT-4-class capability models for example have dropped in price 100-fold since 2022) but the costs borne by infrastructure providers have not dropped at all - and are rising instead - making it even harder for them to make a return on their initial investment ...

 

[pantaiema]

I am far from being a business specialist but from the little I know , from all these "most intelligent people on earth" lets take Elon Musk (the richest on earth) as an example : in my view his only really good & successful idea was the reusable rockets (part of SpaceX) . His other (probably also) good ideas (except Twitter ?) : Zip2 , Xcom , electrical vehicles/Tesla ,Twitter/X , OpenAI , XAi , Neuralink , Boring Company , didn't impress me yet . (https://en.wikipedia.org/wiki/Elon_Musk)

Your example using Elon Musk in this context who many people will considered as an exception rather than the norm, might be inappropriate. Elon Musk is widely considered a unique technology visionary capable of identifying opportunities that elude others. For instance, more than a decade ago, few anticipated that the Starlink project could even become both viable and highly profitable when it first launched. Today, it has evolved into a profitable company and a vital asset, not just for Musk himself but also for the U.S. government, proving its strategic worth during conflicts like the war in Ukraine. Furthermore, Musk now plans to bypass terrestrial energy constraints entirely by the plan to develop low-orbit space data centres powered by the solar energy.

Beyond individual visionaries, major technology corporations such as Alphabet, Meta, Amazon, Microsoft, Nvidia, Broadcom, and Micron, AMD, TSMC, ASML, etc continue to demonstrate immense profitability through their massive investments in AI infrastructure and data capacity building.

There is recent Interview from 'MarketBeat' with Kevin O'Leary, a stock market analysts as well as investor heavily focused on AI data centres.

 

[marcus]

From https://techcrunch.com/2026/10/30/cracks-are-emerging-in-the-ai-spending-boom/
Title : Cracks are emerging in the AI spending boom
By Rebecca Bellan , Oct 2026

Investors are getting nervous about AI infrastructure spending ..

Alphabet, Amazon, Meta, and Microsoft have outlined plans to spend more than $740 billion on capital expenditures this year, which Wall Street is reading as AI infrastructure spending, including data centers and chips ...

enthusiasm seems to be giving way to concerns about negative free cash flow (spending more cash than a company brings in), mounting debt, and whether these enormous investments will ever generate enough returns ..

last week .. Nvidia dropped 4%, Broadcom more than 5%, and Qualcomm 11%, (Meta 10%). Alphabet, which plummeted 12% on Thursday, fell again ...

the wild success of AI Mode — Google’s AI Search — is eating into the company’s money-maker. Google’s Search advertising business, which makes up roughly half of its revenue, saw growth slow to 12%, its weakest pace in 5 quarters ..

Amazon is in a similar boat after reporting negative free cash flow of $42.4 billion over the past 12 months, compared with $14.8 billion in positive free cash flow the year before ..

Meta is also burning cash, reporting negative free cash flow of $2.1 billion in the 3rd quarter as capex outpaced its operating cash. It’s guiding to as much as $145 billion in capex this year. The company noted that Muse, its new free personal AI agent, is ..“very compute-intensive to run,” ..

Microsoft was the only exception when it came to free cash flow — it recorded $18.6 billion in positive free cash flow in its latest quarter, with spending on capex at $45.2 billion, less than the $50 billion it projected (due to projects' delay) ..

It’s worth noting that the money to pay for all of this AI infrastructure isn’t just coming from the Big Tech companies’ profits .. According to S&P Global Market Intelligence, Microsoft, Alphabet, Amazon, Meta, and Oracle raised a combined $326 billion in debt in 2026, triple the amount raised last year.

Demand for AI compute remains strong. Google, Amazon, and Microsoft all saw gains in their cloud businesses. But investors are getting spooked by the costs of meeting that demand ...

 

[harryopal1]

According to an AI summary: Estimates from Wall Street and major financial institutions indicate that 60% to 80% of all stock market trading volume is driven by algorithmic trading, much of which is explicitly programmed for technical momentum strategies—buying as prices rise and selling when downturns appear—rather than evaluating a company's intrinsic worth.

So it seems gambling is still a major factor in where AI values are headed irrespective of company profitability possibilities.