This AI Bubble is Truly Different, and Meta Will Likely be The First Company to Crack

Investment bubbles are a lot like looking back at your youth. There were likely times in your younger days when you couldn’t wait until you were older and on your own. But with the perspective of time, looking back, you realize those were some of the most carefree days of your life.

Stock market bubbles are similar. It’s hard to confirm exactly when you’re in one, but once it’s over, it’s very clear how different that period of time really was.

But there’s something unique about the current possibility that the market, and the broader economy, is in an AI bubble. Unlike the dot-com bubble, most of the big players in the AI bubble make a lot of money doing something totally different than AI.

Microsoft sells enterprise software. Google sells advertising. Nvidia sells graphics cards and related technologies. Meta sells your personal data. Amazon sells... well, everything.

These aren’t bubble companies burning through cash like Pets.com. These are established, highly profitable companies that were leading the stock market before AI burst onto the scene.

That’s what makes this so different from previous bubbles. It also means that the way the bubble pops is going to be different as well. The severity of the bubble popping in AI is going to rely on how well the big players I just mentioned can weather the storm.

Or put another way, how much of their future did they bet on AI saving them before the bottom falls out?

Using this calculus, I believe Meta has the most to lose when the AI bubble pops. Mark Zuckerberg just got done burning $150 billion on his own personal metaverse that never materialized. People seem to forget, but he literally renamed the company because he was so sure that we’d all be living in the metaverse by now.

Now, he’s gone on a spending spree to create a superintelligence before anyone else. As I argue in this article, I don’t think superintelligence is even possible in our lifetime. So he may very well be making another all-or-nothing metaverse-style bet.

In his defense, Instagram and Facebook still make money, but Facebook is not really seen as a fresh property or a center of growth that excites Wall Street investors. There’s not as much to fall back on as there is with Microsoft, Amazon, or Google.

All those companies still have their core business model, and their cloud computing services are fueling growth. Yes, that’s partially due to AI, but they were growing at double digits before the AI boom.

If Meta doesn’t hit some kind of jackpot, they’ll likely be the first signs of the AI bubble popping. Meta needs a huge breakthrough to justify what they’re doing. If they don’t get it, they immediately go back to being a boring social media company that your grandparents use to look at fake AI photos of cats saving their owners from bear attacks.

Unfortunately, I can’t tell you where we are in this bubble cycle. But based on what I’ve outlined so far, we may have a while to go. These companies can continue this bet for a while before they start having issues, and with nobody willing to give up first place, they’ll likely all push themselves toward mutual destruction if the benefits of AI never materialize like investors think.

Just like we all look back at our high school days and wonder how we could have acted so carefree and reckless, these CEOs may wonder the same thing when the LLMs hit a wall.

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James La Forte is an IT professional & freelance writer focusing on technology, business, and finance. His work has been featured in U.S. News & World Report, TechRepublic, MarketWatch, Gartner Insights, and other publications.