Today, Explained The AI bubble
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Oct 28, 2025 
Lily Jamali, a BBC technology reporter, and Paul Kedrosky, a partner at SK Ventures, dive deep into the dynamics at play in the AI industry. Lily explains how the rapid escalation of AI investments creates a bubble, fueled by hype and massive valuations. She highlights concerns about market concentration and the potential for significant financial losses if it bursts. Paul adds a layer, discussing excessive capital spending on infrastructure that raises systemic risks. Together, they explore AI's impact on the economy and the long-term ramifications of an eventual bubble burst.
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Tangled Web Of AI Investments
- Massive corporate and public investment has created a dense web of AI deals linking chipmakers, cloud providers, and AI firms.
- That entanglement raises systemic risk because public companies and retirement funds are exposed to private AI valuations.
Vendor Financing Masks True Demand
- Vendor financing and circular deals are common in AI financing, where investors funnel money that then returns to their own suppliers.
- Such structures can obscure real demand and inflate perceived market strength.
Hype Outpaces Measurable Productivity
- OpenAI keeps releasing new consumer features like video generation and an AI browser, but real productivity gains are still uncertain.
- Early studies and worker reports suggest many workplace AI initiatives don't yet boost profits or efficiency.