Is The AI Bubble Ready To Pop? – Moon of Alabama

 https://www.moonofalabama.org/2025/10/is-the-ai-bubble-ready-to-pop/ 

Dozens of specialized LLM data-centers are getting built to house a huge amount of expensive chips that lose their values faster than a newly bought hyper-car. All without a real use case for LLMs and without any hope for sufficient revenue to ever sustain the business.

This is bad for the U.S. economy.

The money that is flowing into the LLM hype is gone. It can not be invested somewhere else even when that would make way more sense for the larger society – for example in the revival of manufacturing or in apprenticeship programs. Like during the dot.com boom (archived) in the late 1990s the real economy gets crowded out by a virtual one. Trump’s tariffs will not lead to the revival of U.S. industries if there is no money left to invest in them.

The data-centers being built will need huge amounts of additional electricity which can not be generated within the foreseeable future:

The implications are brutal and stark. Curtailed and costly electricity supply for AI and manufacturing will impair American economic competitiveness, with knock-on effects for household affordability. These impacts are already becoming evident, with wholesale pool prices in the U.S. rising by 267% over the past 5 years, on the back of skyrocketing electricity demand from the AI sector (Bloomberg).

All recent U.S. stock market gains were powered by the LLM hype. When the bubble will burst, the stock market will sink and most people who are, directly or indirectly, invested in the LLM hype will lose a lot of their money.

Unfortunately there is no way to foresee when that will happen or how far the damage will spread.

But we can already see damage to the real economy. Investment in factories for real products gets crowded out and electricity prices are doubling and tripling, hitting manufacturers as well as private consumers.