AI Bubble Bigger Than Jupiter: Expert Warns of Worse Than Dot-Com Crash
Renowned technology expert and veteran professor Erik Gordon has issued another stark warning to technology companies and investors, declaring that the artificial intelligence bubble has grown to the size of the planet Jupiter. According to Gordon, when this massive bubble inevitably bursts, investors across the spectrum will face severe financial suffering.
Microsoft's Warning Shot
Gordon pointed to Microsoft's recent second-quarter financial results as a critical warning signal for the broader technology sector. The software giant reported earnings that surpassed consensus estimates on both top and bottom lines, yet its stock price tumbled more than 6% due to moderate cloud revenue growth that failed to exceed investor expectations.
"Microsoft's shares sank because of the truckloads of cash it is investing in AI," Gordon explained to Business Insider. "That is a warning of the burst to come."
Financial filings reveal Microsoft's net cash used for investing surged 95% year-over-year, totaling over $57 billion in the six months ending December. Gordon described Microsoft's performance as the "canary in the coal mine" for technology investments, indicating broader sector vulnerabilities.
Why the Bubble Hasn't Burst Yet
Despite his dire predictions, Gordon does not anticipate an immediate market crash. He identified two primary factors maintaining what he calls a "supported suspension" in current market conditions:
- Institutional investors possess substantial financial resources that can temporarily "prop up" inflated valuations
- Rapid technological breakthroughs in artificial intelligence remain "exciting enough to distract" from what Gordon characterizes as irrational market valuations
Worse Than the Dot-Com Crash
Gordon, who has previously warned of "order-of-magnitude overvaluation" in technology sectors, now believes the impending AI bubble burst will eclipse the devastating 2000 dot-com collapse in severity.
"The suffering will be more painful for investors than the aftermath of the dot-com bubble," Gordon emphasized. "When it bursts, the debris will be everywhere. Big, institutional investors will be hit with it, and so will individual investors who bet the bubble would get even bigger."
The University of Michigan's Ross School of Business professor highlighted that both institutional and individual investors who have placed substantial bets on continued AI expansion will face significant consequences when market corrections occur.
