I keep thinking I should be more interested in the stock markets.

But even a hack like me can see that there is an AI bubble forming. Many AI companies, especially startups, are valued based on future potential rather than current profitability. Some investors are not even interested in product anymore: in a recent story, the VC firm Andreessen Horowitz backed an AI company based on it PROMISING a product.

At the same time, the US administration are erasing the economic gains of the past years with crazy tariff policies. If “policy” is indeed apt for their on-again-off-again decisions.

And did you know that a single AI training run for a model like GPT-4 can use as much electricity as 1,000 US homes in a year? AI data centres consume 10-50x more energy than traditional ones.

Which leads me to the following thought experiment: 

What if we combine 1) US-lead AI bubble bursting with 2) the current administrations tariff policy which is leading the us economy into stagflation, 3) the stark rise in energy use by new data centres built to feed the AI hunger.

I asked My AI. For the record, I don’t use ChatGPT, but the very capable Mistral Chat. So your mileage may vary if you feel you need to reproduce. 

AI Bubble Burst: There is a moderate chance of a severe crash in AI stocks. That’s a 50% drop. That will trigger a global recession, tech sector collapse, geopolitical tensions. Chance of a less severe crash? High, with a 20% drop, moderate market volatility; tech layoffs but no systemic crisis.

Tariffs: To be honest, Biden also imposed tariffs, but the Trump admin has made it worse and far more erratic. This is leading to stagflation (stagnant growth + high inflation). Stagflation erodes confidence in long-term growth, making investors less willing to fund AI ventures.

High Energy Consumption: I already mentioned how energy-hungry AI gets. It could lead to energy costs exploding for households, and in areas where the infrastructure hasn’t been maintained properly, like California or Texas, but also other states, there might even be rolling blackouts.

Which leads to a perfect storm: AI crash causes stock collapse and tech layoffs, tariffs lead to stagflation, higher costs for households and reduced investment across the board, energy hunger of AI data centres leads to sky-high prices combined with blackouts. With serious global consequences.

And should we care? As a somewhat aging person, I lived through the bursting of the internet bubble. To be honest, it didn’t have much effect on me personally, or our household. I went ahead and learned about the internet, which led me to my current profession as a software developer and the owner of a software company. 

So, based on how we experienced the bubble bursting back then, I can't help to think that it will all come together in the end. But am I right?

That bubble burst in another, much more mellow time.