What happens if the AI bubble bursts?

As consumers, should we be concerned about the looming prospect of an AI bubble bursting?

Thursday, 9 October, 2025

As anyone old enough to remember the BBC show Tomorrow’s World will acknowledge, predicting the future is incredibly difficult.

Nonetheless, past events sometimes offer an insight into likely future events, particularly when it comes to finance and investments.

The dotcom boom of the early Noughties came as a shock to many people, and so did the global financial crisis (GFC) a few years later. Yet both could have been predicted.

Some people believe another stock market crash is imminent – this time due to artificial intelligence, and the exponential growth in value of AI-based companies.

If the AI bubble does burst, is the development of AI likely to suffer, and will its much-vaunted benefits still ripple out to benefit consumers?

Crisis? What crisis?

Like a number of emerging technologies over recent times (more of which in a moment), AI has been hyped to a level it can never hope to attain.

Based on stock market valuations, the AI bubble is now reportedly 17 times larger than the dotcom bubble, and four times larger than the real estate bubble which triggered the GFC.

AI companies are now investing in each other, possibly to drive growth, or possibly to try and insulate themselves against an impending crash.

Similar circular deals have previously preceded other boom-to-bust cycles, so there’s clear evidence of these you-scratch-my-back investments preceding a market collapse.

Experts believe the unreliability and cost of current AI models could lead to their failure, while AI’s impact on the jobs market appears to have been hugely overstated.

Energy costs alone could hinder AI’s expansion, as might growing public hostility. A recently published survey revealed 95 per cent of Brits don’t want to talk to AI chatbots.

We certainly don’t want to listen to AI-generated music or read poetry written by an algorithm with no appreciation of indigenous culture, humour, passion, trauma or fear.

But isn’t AI the future?

To listen to the breathless exultations of ChatGPT and its competitors, you’d certainly think so.

There’s no doubt that AI has potential to transform data-intensive tasks, from analysing medical scans through to summarising reams of paperwork before a board meeting.

Its ability to create everything from newspaper articles to indie-rock albums is unprecedented in human history.

Yet just because something can be done doesn’t necessarily mean consumers want it to.

Dark clouds surround generative AI algorithms, which have effectively stolen the entire internet, peppering their plagiarised output with hallucinations and factual errors.

Reams of worthless AI slop are drowning social media and corporate intranets alike, with a new video app specifically created to host AI-generated clips of often laughable absurdity.

Nor should we forget about the many hysterical proclamations regarding other technologies that were going to change the world, but ultimately didn’t.

Cryptocurrency is perhaps the best example of this phenomenon.

Initially fêted as the death knell for traditional currencies and banks, it’s regressed into an investment toy for speculators who want a Lamborghini without having to get a proper job.

It’s also been sixteen years since the blockchain debuted, with its heady promises to transform law and business. Its impact on the general public has been almost intangible.

The metaverse represented the future of communications until it collapsed under the weight of its own absurdity, and the less said about NFTs, VR headsets or Internet.org, the better.

In truth, AI is unlikely to end up on the digital scrapheap. There is growing agreement that it could be transformative if used wisely, yet it also poses existential dangers in many areas.

So what happens next?

The current stock market bubble is clearly unsustainable, and a reckoning is already overdue.

When it happens, the UK economy will suffer – though not as much as America’s – and many companies will fail while stronger businesses will necessarily adapt to survive.

The dotcom boom didn’t spell the end of the internet, but it did temper some of the hysteria which had previously surrounded a breakneck race towards a purely digital future.

AI is here to stay, but its generative variant may be short-lived as consumers revolt against inauthentic content, and as investor hyperbole is replaced by serious business models.

Neil Cumins author picture

By:

Neil is our resident tech expert. He's written guides on loads of broadband head-scratchers and is determined to solve all your technology problems!