It should be damn obvious that the current blistering AI bubble is setting up Wall Street, the US economy and Trump-O-Nomics for a thundering bust. The AI frenzy has now gotten so out of kilter that fully $140 billion or 76% of the $184 billion gain in real GDP during the first half of 2025 was accounted for by feverishly surging investments in AI-oriented GPUs, network gear, server farms and data centers...
....So the question recurs. What happens when (not if) the AI bubble crashes. The sheer certainty of the latter is due to the fact that the runaway stock market is generating so much artificial capital that the AI-oriented hyperscalers are operating straight out of the playbook of the late 1990s dotcom bubble. That is, they are injecting huge amounts of capital into start-ups, smaller customers and linked vendors in their supply chain eco-systems, thereby enabling the latter to buy from these same high flyers massive amounts of chips, network equipment, other gear and software for data centers and server farms. NVIDIA, Microsoft etc. can then report soaring sales and stupendous profits. That is, until the bubble finally bursts......
.....It goes without saying that a $650 billion decline in capital spending would also plunge the already struggling US economy deep into the recessionary drink, and do so at a time when there is no policy margin for error. That is to say, fiscal policy is already tapped out with $38 trillion of public debt and the Fed’s printing presses have already implanted 40 year high inflation in the price level of the US economy.
We’d say that what is coming down the pike, therefore, does not look much like the ballyhooed Golden Age the Donald and his MAGAphones so foolishly expect.