As central banks sound the alarm about an artificial intelligence bubble, the parallels with previous stock market manias cannot be ignored. It is November 2027, and the multidimensional crisis that financial markets have feared for years is rapidly unfolding.
Vladimir Putin has secured significant victories in the war against Ukraine, and in the Far East, China's Xi Jinping is openly preparing for an attack on Taiwan, emboldened both by Putin's success and the failure of Donald Trump in the mid-term congressional elections, which significantly reduced the US's capabilities for an effective counter-attack. In the Middle East, the fragile peace that Trump secured in 2025 has already collapsed, plunging the region into a new wave of conflicts.
Chaos
And in the financial markets, absolute chaos prevails. Trillions of dollars in losses are being incurred in the artificial intelligence (AI) sector, which was once considered the future. With the global economy on the brink of recession and unemployment dramatically increasing, it is clear that the market for AI services has been overestimated.
Despite the promises of AI evangelists, productivity is stagnant. Instead of improving output, reports indicate that AI is causing damage to many businesses where it has been applied most intensely. Some of the promises made to investors and lenders are now proving to be obviously deceptive. Many of the large deals that characterized the later phases of the great AI bubble, with customers and suppliers buying each other's shares, are rapidly collapsing in a storm of lawsuits, broken promises, and disappointed expectations.
How investors inflated AI
But this is not the only problem. Besides the stock market collapse, there is also a debt crisis of gigantic proportions.
Almost everywhere, bond market investors are in despair as interest rates skyrocket. Global governments are struggling both to refinance the mountains of debt and to fund their ballooning expenditures. Private credit, a form of financing that flourished outside the traditional, more strictly regulated banking system, is collapsing, as the folly of lending to high-risk companies, which do not have access to other sources of credit, is now apparent to all. The extent of the damage is enormous.
Signs of crisis
The crisis is so intense that the entire construct of competitive monetary systems, upon which the world's financial architecture rests, seems to be collapsing. Instead, states are trying to erect financial barriers, desperately attempting to prevent investors who have not lost everything from fleeing to safer havens. But these investors are realizing a horrible truth: even if they manage to withdraw their money, there appears to be no safe place to put it.
Repetition of 1929
The economy relies entirely on trust and confidence, and it has rarely looked as vulnerable as it does today. Even the usually calm Bank of England and the International Monetary Fund are now warning about the possibility of a sharp, destabilizing correction in stock markets, which have been overly inflated by the enthusiasm surrounding the transformative potential of artificial intelligence.
Valuations have reached their limit, with the so-called "Shiller Cyclically Adjusted Price Earnings Ratio"—which is generally considered the most reliable indicator of where the market stands relative to previous highs—approaching the historical high recorded during the dot-com bubble and being slightly higher than it was before the great 1929 crash. The parallels with previous stock market manias are striking. US stock valuations are now higher than before the "Great Depression."
Uncertainty
When a banking behemoth like Jamie Dimon, CEO of JP Morgan, openly expresses his concern, then it is time to sit up and take notice. Dimon said in an interview last week that he is much more worried than others about the possibility of a serious market correction. He referred to "many things out there" that create an atmosphere of uncertainty, citing geopolitical instability, unsustainable government spending, and the re-emergence of militarization.
The excessive enthusiasm
Although it is not clear exactly which event will burst the bubble, there is no doubt about the bubble itself. The hype around AI is out of control, with the grand prize being the dominance not of the generative AI chatbots we are accustomed to using in our daily lives, but of so-called "general artificial intelligence," or computers with cognitive abilities similar to those of a human, only infinitely faster and more powerful.
The risks from the "feverish" state of AI are not just in unbridled financial speculation. The scale of investments and promises made in the artificial intelligence sector is such that its failure could have potentially devastating consequences for the entire global economic system.
This is especially true for start-ups and major tech giants that have invested billions in developing applications using AI. If the technology fails to live up to its promises or if its actual performance proves to be much less than expected, financial markets may experience an explosive combination of stock devaluation, employee layoffs, and revision of business strategies. The bubble will burst, and the consequences will be evident everywhere.
Even if artificial intelligence proves genuinely capable of transforming production and services, the benefits will not be immediate, and the problems of social and economic division of labor may grow instead of diminish. Layoffs, inequalities, and social unrest, as happened in the case of the first Industrial Revolution, could intensify, while the labor force itself will be in immediate danger.
Problems in Artificial Intelligence development
The problem with AI is that despite the fantastical possibilities being projected, this technology is not ready for mass adoption. Many of the companies and products supposedly based on artificial intelligence are not delivering the expected results. Developing smart systems that understand and respond to the human mind remains extremely difficult, with many of the applications being incomplete and limited in their functionality.
The result is that the "promise" of a radical transformation of the economy through AI remains hypothetical and outside the immediate horizon, even if investments continue to flow. The overestimations of future profits, which led many businesses to invest in non-existent or overpriced products, create a risk for the market and the workers who rely on these short-term successes.
The connection to past bubbles
The parallels with past bubbles are clear. As happened with the financial crisis of 2008, investors had excessive expectations for property prices, believing that prices would continuously rise. The fall in property prices was catastrophic for the financial market, causing a global recession. In the case of artificial intelligence, the failure or over-promotion of its actual value could cause a similar "chain reaction," destroying confidence and liquidity in the market.
Another similarity is the vertical increase in investments in a new and unexplored technology, without adequate knowledge of the risks or its true potential. In the history of stock market manias, the same happened with "pharmaceutical companies" in the 1980s and the "bubbles" with corporate bonds that followed. In the end, the lack of real value and sustainability led to collapse.
Assessing possible developments
If history has taught us anything, it is that financial markets, when overheated by the "golden prospect" of a new technology, can create bubbles that will eventually burst.
The more speculation grows around artificial intelligence, the more the pressure for a market correction intensifies. However, the impact of this correction is likely to be much greater than the crises of the past, as artificial intelligenceaffects many sides of our daily lives and the global economy.
The combination of conflicting geopolitical risks, economic imbalances, and pressures from artificial intelligenceleads us to a world that is extremely unstable and difficult to predict. Whether the AI crisis comes sooner or later, the outcome may be catalytic.
No matter how much most central banks try to prevent a major economic crisis, the warnings about market movements are becoming increasingly alarming. It is impossible to say for sure if 2027 or 2028 will constitute the new turning point, but the market's dynamic points towards the artificial intelligence bubble and its collapse. Politicians, governments, and investors must prepare for the next big upheaval—whatever it may be.
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