So, what is the AI Bubble Anyway?
In late 2022, OpenAI’s ChatGPT ignited the first sparks of the AI frenzy with the release of its sophisticated chatbot that can emulate human thought patterns by answering questions, conducting research, brainstorming, editing, and even creating images. This triggered a massive artificial intelligence spending spree as billions were poured into AI development, investment, infrastructure, and data centers. Led by the likes of Google, Meta, Microsoft, Amazon, and Nvidia — a multi-year market rally has pushed valuations of technology innovators to dizzying heights and created a disconnect between the value of stock shares and the financial fundamentals of corporate balance sheets.
This is drawing comparisons with the dot.com boom and bust as well as the subprime housing crisis, both of which resulted in a sudden and punishing correction. If the current AI frenzy goes the way of past speculative bubbles, precious metals will be the clear investment winner when things come tumbling down.
Remember the Ghosts of the Past
When it comes to speculative bubbles, it’s all about the hype. It’s about the rise, the build-up, the fear-of-missing-out and the greed. What it isn’t about is reality, practicality and prudence.
Back in April of 1999, Jeremy J. Siegel, a professor of finance at the Wharton School wrote the following in the Wall Street Journal.
“No market in history has continued to rise without bound. The Dutch tulip-bulb mania of the 16th century, the Florida land bubble in the 1920s and the speculations in precious metals in the 1980s all came to an end. Eventually the value of all assets must confront the law of economics. This law dictates that the value of any asset must be tied to the future cash returns paid to the owner of the asset. This law does not say that Internet stocks are necessarily overpriced. It does say that we must take a hard look at the valuations of these firms and decide whether their current prices realistically reflect their economic potential.”[1]
Less than a year later, the Nasdaq would fall nearly 80%. Similarly, back in March of June of 2005, journalist Jonathan R. Laing, explored the warnings of Yale Economist Robert Shiller.
“Housing busts, unlike bear markets on Wall Street, often start almost imperceptibly and unfold slowly. They’re difficult to detect in their early phases, in part because accurate price data on comparable-home sales is hard to come by. Sure, you can look at tax records to calculate the prices fetched by two homes, each with four bedrooms and three baths and located in the same town. But determining precisely how their conditions, amenities and neighborhoods stack up isn’t easy … Shiller worries that the market has become so overheated in many areas of the U.S. that any decline could pick up momentum in two to three years, when the adjustable-rate mortgages that have accounted for nearly half of all home loans in the second half of 2004 will begin to ‘reprice’ at higher interest rates.”[2]
Within months of Shiller’s “worries” one of the worst financial crises since the Great Depression began to rapidly unfold as real estate prices across America fell by an average of 30% and 10 million families lost their homes to foreclosure.
How much Worse is AI Mania?
Now here comes the scariest part for investors in 2205 and 2026. Many notable experts now claim that the current AI bubble is considerably larger and significantly more dangerous than either of the crises described above — both of which decimated household wealth.
Independent research firm the MacroStrategy Partnership, which advises 220 institutional clients, delivered a cautionary note written by their analysts including Julien Garran, who previously led UBS’s commodities strategy team. The note warned that the AI bubble is 17 times the size of the dot-com bubble, and four times bigger than the 2008 global real estate one.[3]
At its peak, the dot.com bubble was almost $7 trillion while estimates put the subprime housing bubble as high as $25 trillion. So, according to these experts, the current AI bubble is a $450 trillion goliath — significantly larger than the entire world economy and the total value or global stocks.
And according to the Washington Post, big tech companies are spending unprecedented sums on AI. Their capital expenditures — money spent on assets like buildings and equipment — have soared over the last two years, as they splurged on data centers stuffed with powerful computer chips to run AI software.[4]
What would an AI Bust Look Like?
Is there any computation or formula that could qualify or quantify the potential fallout if all the AI hype comes crashing down? Not really, because we’ve never really been in a place like this before. The speculation and conjecture, however, is very worrisome.
According to “Insights” from the Yale School of Management, if the AI bubble explodes or implodes, there would be a painful domino effect.
“A small group of companies is securing most of the major deals. News about multibillion-dollar investments from familiar companies such as OpenAI, Nvidia, CoreWeave, Microsoft, Google, and a few others is reported almost daily. Should the bold promises of AI fall short, the dependence among these major AI players could trigger a devastating chain reaction, causing a widespread collapse similar to the 2008 Great Financial Crisis.”[5]
Similarly, a recent feature from Bloomberg ponders whether it’s 1999 all over again.
“Echoes of the dot-com era can be found in AI’s massive infrastructure build-out, sky-high valuations and showy displays of wealth. Venture capital investors have been courting AI startups with private jets, box seats and big checks. Many AI startups tout their recurring revenue as a key metric for growth, but there are doubts as to how sustainable or predictable those projections are, particularly for younger businesses. Some AI firms are completing multiple mammoth fundraisings in a single year. Not all will necessarily flourish.”
The animal spirits, unchecked speculation and herd mentality are perhaps perfectly illustrated by OpenAI’s $500 billion valuation … making it the most valuable company in the history of the world — that has yet to be cash flow positive.
What Will Precious Metals Do?
If the AI megatrend experiences a pull back, correction, or goes completely bust — there will be a heavy rotation into precious metals. Gold, Silver, Platinum and Palladium are all alternative assets that tend to be negatively correlated to the stock market.
The Wall Street Journal recently wrote “A Guide to Cushioning Your Portfolio Against an AI Bust” and specifically mentioned gold and silver as important safe havens in the event of a sudden market reversal.
“Then there is gold, this year’s hottest alternative to the stock market’s ups and downs. Prices of the precious metal recently surpassed $4,000 a troy ounce for the first time, boosted by concern about the outlook for inflation and the economy. The same worries are fueling gains in other precious metals: Silver prices reached their own record earlier this month, their first since 1980.”[6]
Let’s not forget that gold rose more than 20% in the three years following the dot.com bust and surged as high as 100% in the four years following the subprime mortgage crisis.[7]
Then like now, precious metals are a ‘flight-to-safety’ and live happily outside of the financial system during times of economic shock, market crash, or a complete capital market breakdown. As a result, they can help diversify your portfolio, protect your wealth and safeguard your net worth if the AI sector gets wiped out.
ORION METAL EXCHANGE is a top-rated
PRECIOUS METALS DEALER with Best-in-Class CUSTOMER SERVICE.
Get a FREE Investor Kit and up to $30,000 in FREE metals (on qualifying purchases).
REPRESENTATIVES ARE AVAILABLE NOW AT: 1-800-559-0088
[1] https://www.wsj.com/articles/SB924457954702688446?
[2] https://www.barrons.com/articles/SB111905372884363176
[3] https://www.morningstar.com/news/marketwatch/20251003175/the-ai-bubble-is-17-times-the-size-of-the-dot-com-frenzy-and-four-times-subprime-this-analyst-argues
[4] https://www.washingtonpost.com/technology/2025/11/22/ai-bubble-economy-evidence/
[5] https://insights.som.yale.edu/insights/this-is-how-the-ai-bubble-bursts
[6] https://www.wsj.com/finance/stocks/a-guide-to-cushioning-your-portfolio-against-an-ai-bust-ef80e6de?
[7] https://futures.stonex.com/blog/gold-and-the-global-financial-crisis-of-2008
