Artificial Intelligence: Friend, Foe, Fraud

The over-hyped Dot.com revolution bubbled and crashed at the end of the 1990s, leaving a largely unused physical and virtual infrastructure that eventually supported the rise of social media that did—indeed—transform life. Not necessarily in a good way. As Robert Gordon famously claimed, you can see the evidence of the digital revolution everywhere except in the data. Still, many billionaires were minted. After nearly a quarter century of growth, it seemed to have run its course until digital tech moved into the payments system promising another revolution based on cryptocurrencies. That, too, was over-hyped until Trump’s reelection loosened rules to allow crypto to infect the financial system, targeting in particular the accumulated retirement savings of Americans. More billionaires minted. As P.T. Barnum (purportedly) proclaimed, “there’s a sucker born every minute” and they add up but the number is still finite. The latest revolution is AI and it has generated the biggest bubble, by far. We are still in the early stages, but not only is AI almost single-handedly driving the stock market, it is also driving the “real” economy with its investments in data centers. One hundred and three American billionaires were created since 2024, much of that thanks to AI-related stock prices and investments. This paper will look in detail at the claims made for AI, the financial arrangements that are supporting its growth, and the dangers it poses for the US (and global) economies. While some argue that the current bubble looks little like the Dot.com bubble, that is true, but beside the point. The fragile financing of the AI bubble looks much more like the financial shenanigans that crashed into the Global Financial Crisis. And, unlike the Dot.com bubble that left us with a physical infrastructure that would eventually prove useful, the AI bubble will leave behind waste and destruction.