AI Investment Is Already So Much Larger Than the Subprime Mortgage Bubble That You’ll Physically Flinch

Yowch.

By Joe Wilkins

Published Oct 9, 2025 10:13 AM EDT

No matter how much is said about the hundreds of billions of dollars hovering over the tech industry’s head like an anvil in the “AI bubble,” it just won’t pop. Not only is it refusing to budge, but it’s growing by the day.

The AI bubble is getting so bad, in fact, that it’s making previous market bubbles look like chump change.

According to a new assessment by Julien Garran, a research analyst with the firm MacroStrategy Partnership, the AI bubble is now a staggering 17 times the size of the infamous dot-com bubble, a first-of-its-kind run on tech stocks tied to investor hype over the internet. Even worse, Garran estimates that AI now accounts for over four times the wealth trapped in the 2008 subprime mortgage bubble, which resulted in years of protracted crisis across the globe.

In the case of the dot-com bubble, according to macroeconomist David Henderson, major economic catastrophe was avoided as the impact of the stock market rush on US GDP growth was minimal. Unfortunately that isn’t the case with AI investment, which now accounts for a massive chunk of our economic growth after years of unfettered hype.

Prior to the 2008 financial crisis, meanwhile, bullish investors fed into a doomed property market created by banks to turn high-risk mortgages into a font of cash. Like those toxic subprime mortgages, AI has demonstrated very little long-term value — at least at this point in its life, Garran notes.

The trouble with AI, he told MarketWatch, is you “can’t create an app with commercial value as it is either generic [as in video games], which won’t sell, or it is regurgitated public domain [as in homework], or it is subject to copyright.”

He adds that it’s also a hard product to market effectively, as one AI startup in New York City is making clear as its subway adverts get covered with hostile graffiti. All the while, Garran says, the cost of AI systems is growing exponentially larger, with rapidly diminishing gains in capability.

It’s a futile exercise to predict what might finally pop the AI bubble, but one thing’s clear: we’re already at a point of no return.

“To find out whether we have hit a wall we have to watch the LLM developers,” the analyst said. “If they release a model that cost 10x more, likely using 20x more compute than the previous one, and it’s not much better than what’s out there, then we’ve hit a wall.”

Absent AI, Garran warns the economy is already slowing to a crawl, and it’s only a matter of time before the explosive growth in the tech sector begins to reverse, as it did during the dot-com bubble.

Given the sheer size of the threat, it seems the best time for the bubble to burst was yesterday. The second best time, perhaps, is right now.

More on AI hype: The AI Bubble Bursting Would Actually Be Incredible for the Economy, Economist Says

Joe Wilkins

Contributing Writer

I’m a tech and transit correspondent for Futurism, where my beat includes transportation, infrastructure, and the role of emerging technologies in governance, surveillance, and labor.