The economic landscape is feeling the tremors as a series of dominoes tip over, affecting every corner of our financial system.

Euphoria often meets a harsh reality, and now, that reality is setting in with a painful twist. The new darling of innovation, hailed as the solution to all our woes, turns out to be flawed—perhaps even deceptive. Instead of saving the day, it seems to have taken our trust and our resources.

Enter the AI Boom/Bubble. The excitement surrounding AI is palpable, yet the gap between this enthusiasm and actual returns is widening. Here are some key points to consider:

1. Investment vs. Revenue: The revenue generated by AI pales in comparison to the massive investments being made. The optimism is based on a belief that revenues will eventually catch up, but doubts are creeping in. If revenue estimates are off by 50%, we’re only seeing 3% of the revenue needed to justify the hefty capital investments being poured in. This prompts questions about the reality behind the glitzy promises.

Source: Bain & Company

1. Trust Issues with AI Tools: AI tools often produce work that appears polished but lacks substance. This “workslop” can mislead users, making it harder to discern genuine value. The result? More wasted time sorting through AI-generated content instead of enhancing productivity.

Source: Harvard Business Review

1. Slowing Adoption Rates: Major companies are starting to slow their adoption of AI technologies. This suggests that those with the resources to evaluate AI’s effectiveness are seeing a decline in its real-world utility.

The narrative shifting blame onto companies for AI’s underperformance raises concerns about accountability. Is the promise of AI merely a way to deflect responsibility?

1. Resource Competition: AI data centers are vying for vital resources like electricity and water. While some argue that their consumption is minimal, the reality is that demand from well-funded AI projects is driving up utility prices. Households are already feeling the pinch, with rising bills prompting complaints. Ignoring the strain AI puts on essential resources is akin to overlooking a thief in plain sight.

Source: Bain & Company

While AI has potential, the reckless infusion of capital into the sector amidst all this excitement could very well trigger an economic crash. Capital isn’t infinite, and poor investments yield little return, diverting funds from more productive uses.

As costs for utilities rise, consumers may find themselves with less disposable income, impacting their spending habits. Companies will be compelled to reassess their investments in AI, leading to a pullback that could deflate the inflated AI Bubble—an echo of the dot-com era.

So, will AI crash the economy? The mix of malinvestment, disappointing returns, soaring utility costs, and an inevitable withdrawal of investment spells trouble. Once the stock market bubble bursts, the resulting decline in consumer confidence will trigger a cycle of reduced spending and borrowing.

One domino falling might be manageable, but this situation is different. The cascading effects will touch every facet of the economy, and what once seemed secure could soon face significant upheaval.