For quite some time, investors have been warning that the hundreds of billions of dollars being poured into building giant AI data centers could lead to a credit crunch. A recent survey by Bank of America found that more than a third of fund managers believe corporations are overinvesting in physical assets.
Still, all told, AI companies are looking to spend Record breaking $650 billion On AI in 2026 alone, an astronomical amount that has investors excited, especially given how largely unprofitable AI ventures have been to date.
For Lloyd Blankfein, who led Goldman Sachs through the 2008 subprime mortgage crisis, it is entirely reasonable to be prepared for a shock to the system, especially given the tone of investors discussing the massive accumulation of debt.
“I wonder where the secret leverage lies in this,” he told Pablo Salam, Citadel’s co-chief investment officer, during a recent interview. quoted by Wire. “Now everyone says, ‘Oh, the world hasn’t been taken advantage of.'”
“That’s what everyone said during the mortgage crisis, until you suddenly realize there was a lot of mortgage risk in Iceland,” he said. (The entire banking system of a European nation collapsed Within a week in 2008, it was forced to find emergency assistance From the International Monetary Fund.)
“It smells of that kind of moment again,” he said metaphorically in poetic terms: “I don’t feel the storm, but the horses are starting to moo in the barn.”
Blankfein argued that AI companies are looking to open themselves up to public investment at a very uncertain time, potentially putting retail investors at risk.
“Where there is liquidity, we have to worry about opaque assets,” he told Salame. “We’re getting near the end of the final stages of the cycles on this – and we’re due for a reckoning of sorts.”
If the bubble bursts, potentially taking individuals with it, the consequences for companies could be severe.
“When you lose individual consumers — that is, taxpayers and citizens — money, people in government get very, very upset. Regulators get very, very upset,” Blankfein said.
Blankfein is far from the first financial giant to warn of impending turmoil. For example, Vincent Mortier, chief investment officer at fund management firm Amundi, pointed out financial Times Earlier this year it was said that “what excesses there are on AI in the equity markets… are no longer questionable.”
“But it is difficult to know which exact companies will suffer losses and when that reckoning will occur,” he said at the time.
Other experts have long compared the boom in the AI industry to the dot-com bubble of the 1990s, with some even claiming that the new crisis could be even worse.
What’s worse, such a “calculation” could cause a major shock in global markets, potentially leaving taxpayers in trouble. Investors worry that the entire US economy has become “a big bet on AI”, raising the possibility that the collapse of the AI bubble could impact everyone’s fortunes.
Despite many bold predictions of financial crisis, the AI industry has managed to successfully convince investors of the long-term viability of the technology. Companies including OpenAI and Elon Musk’s XAI, which was recently spun off into his space company SpaceX, are reportedly “preparing.”eye opener“Initial Public Offering.
But for Blankfein, the longer we wait, the more severe the fallout will be.
“The longer the time between counts, the more serious the count is likely to be,” he said. told financial Times In a separate interview. “I’m not saying it’s going to happen tomorrow or from which direction it will come. But when something happens you will get all the assets at prices that cannot be sold in the market.”
More on AI Bubble: Investors are worried that the AI bubble is finally bursting
