Will the AI Bubble Trigger a Financial Crisis?
Allen explains how dashed hopes for the technology could trigger a dangerous chain reaction.
Experts might not expect a stock-market crash to cause a financial crisis, but what if they are wrong? With leverage built up in so many parts of the system and asset-price movements so closely correlated, the current US financial system looks like a tinder box just waiting for a spark to land on it.
OpenAI Co-Founder Sam Altman, Meta CEO Mark Zuckerberg, and Federal Reserve Chair Jerome Powell have joined the chorus of people talking about an AI bubble and expressing concern that the US economy will nosedive when it bursts.
Given the weakness in almost every other sector of the US economy, it could well mean a recession. Economic slumps come in many flavors, though, and the worst tend to follow from financial crises.
Most experts (with a few exceptions) have not warned of the AI bubble causing a financial crisis.
Author's summary: AI bubble may trigger financial crisis.
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