While the world watches in fascination at the latest technological wonder, a financial catastrophe is already boiling beneath the thin film of investment illusions, ready to burst and flood the global economy with a wave of bankruptcies, unemployment, and despair.
Blind Investment in Digital Mirages
Let's face the truth — we live in an era of economic absurdity. Venture capitalists, these modern alchemists, are throwing billions into startups that merely promise something revolutionary with the prefix "AI." Heck, it's enough to add this magical abbreviation to a company's name, and its valuation skyrockets faster than you can say "artificial intelligence."
The world of AI investments resembles a mad casino where the dealer deals cards with closed eyes, and players bet everything without even seeing their hand. Incredibly, the volume of investments in the AI sector in 2023 exceeded $200 billion — an amount comparable to the GDP of entire countries! And what do we get in return? A barrage of applications that essentially offer us technological fast food — quick, flashy, and with minimal nutritional value.
This financial bacchanalia is suspiciously reminiscent of the dot-com boom of the late '90s. Back then, the ".com" suffix to a company's name was enough to attract insane money. Today, it's the same story with "AI" — only the scale is many times larger, and the potential damage to the economy is much more serious. What did business gurus say then? "The new economy operates under new rules." We all remember how that song ended — trillions of evaporated dollars and thousands of companies that turned into digital dust.
Historical Lessons That No One Learns
Humanity steps on the same rake with enviable persistence. The Dutch "Tulip Mania" of the 17th century, the railway fever of the 19th century, the internet boom of the late 20th — all these episodes follow the same script: new technology → excitement → irrational investor behavior → crash → economic pain. But for some reason, we are convinced that this time "it will be different."
In 1720, the infamous South Sea Company bubble ruined thousands of Britons, including Sir Isaac Newton himself, who lost the equivalent of several million pounds in today's money. His famous quote: "I can calculate the motion of heavenly bodies, but not the madness of people," describes the current situation perfectly. Only instead of colonial adventures, we now have digital data colonies and algorithms that essentially remain black boxes even to their creators.
Today's AI market pulsates with dangerous symptoms of a pre-crisis state. Companies with minimal revenue and maximum promises receive multi-billion-dollar valuations. Anthropic with its Claude model has attracted over $7 billion in investments, while the economic effect of the product remains nebulous. How many startups do we now have building their business models on "we'll take OpenAI and add something on top"? Hundreds? Thousands?
Signs of the Approaching Storm
Experienced sailors know: before a storm, the sea often becomes unnaturally calm. In the AI financial market, we observe similar ominous signs:
First, absurd valuations. Startups without products but with loud promises receive investments of hundreds of millions of dollars. Nvidia, which has become a symbol of the AI boom, has increased its market capitalization more than 10-fold in three years — common sense suggests that such growth cannot be sustainable.
Second, the emergence of non-core players. Companies from all possible economic sectors suddenly become "AI companies." Beverage manufacturers announce the implementation of AI to optimize recipes, agricultural enterprises launch "smart" irrigation systems — all this resembles an attempt to jump on the departing hype train rather than a real transformation of business.
Third, talent shortage and inflated salaries. Machine learning and large language model specialists receive astronomical compensation — million-dollar salaries have become almost the norm. This creates an unhealthy labor market where companies overpay for talent not because they can afford it, but out of fear of falling behind. How long can this continue? Only until the first serious cuts in investment budgets.
And finally, technological hype outpaces real capabilities. We hear endless promises about how AI will change medicine, education, transportation, and any other sphere of life. But the reality is that most of these promises remain only on presentation slides. AI systems still make elementary mistakes, suffer from "hallucinations," and require enormous computational resources.
When the Virtual Bubble Bursts in the Real World
The collapse of the AI bubble will not be limited to the disappearance of paper billions and investor disappointment. Its consequences risk becoming a cascading effect for the entire economy, especially considering how deeply technology companies are integrated into the modern financial system.
Imagine: major tech giants, whose shares constitute a significant portion of index funds, suddenly lose 50-70% of their capitalization. This will instantly affect the pension savings of ordinary citizens investing through ETFs and mutual funds. This will be followed by a reduction in consumer spending, which will hit retail and services.
A wave of layoffs in the technology sector could lead to structural unemployment, especially among specialists with a narrow profile of competencies. These people with inflated salary expectations will suddenly find themselves in a world where their skills are no longer worth millions. The psychological shock will exacerbate the economic one.
But the most frightening thing could be a crisis of confidence in technological innovations in general. After the dot-com industry crash, it took almost a decade to restore investors' faith in internet companies. How long will it take to recover after the AI crash? And what will happen to truly promising technologies that will remain without funding due to general disappointment in the sector?
Most ironically, warnings about possible risks often come from the creators of AI technologies themselves. These Cassandras of technology talk about dangers, but their voices drown in the chorus of enthusiastic marketers and investment analysts whose bonuses directly depend on maintaining euphoria in the market.
Is There a Chance for a Soft Landing?
Fatalism is a bad advisor for an investor. Even in conditions of an inflating bubble, there are strategies that can, if not prevent a crash, at least minimize its consequences for the economy and individual market participants.
First, a revision of expectations is needed. Investors must stop viewing AI as a magic wand and start demanding specific business models and profitability plans from startups. The focus should shift from "technology capabilities" to "solving real user problems."
Second, regulators can play a positive role by introducing more stringent requirements for information disclosure for companies claiming AI developments. Transparency regarding the real capabilities of technologies will help separate the wheat from the chaff and reduce the degree of speculation.
The third option is the gradual "deflation" of the bubble through a natural cooling of investor interest and a more realistic assessment of technology prospects. Such a scenario has already been observed in some segments of the crypto market, where the initial euphoria was followed by a "crypto winter" phase, which was followed by more mature and meaningful development.
Finally, diversification is the best defense against any bubble. Smart money is already looking for alternative assets capable of preserving value in the event of a technological crash. Paradoxically, some of these assets themselves use advanced technologies, just with a more substantiated approach and less marketing noise.
When Everything Collapses, New Foundations Are Needed
History shows: after each bubble comes a period of sobering up, reevaluation of values, and the search for new, more sustainable models of development. And here technologies that focus not on speculative value but on real value for users can take the stage.
Particularly interesting in this context are innovative financial instruments capable of serving as a hedge against inflation and economic instability. For example, algorithmic currencies with built-in stabilization mechanisms represent an attempt to create assets resistant to market upheavals.
DeflationCoin represents just such an innovative approach. Unlike typical cryptocurrencies, DeflationCoin uses a reverse inflation mechanism — a unique concept where the number of coins in circulation is not just limited (as with bitcoin) but gradually decreases according to algorithmic rules.
While traditional markets, including the overheated AI sector, demonstrate high volatility and susceptibility to speculative sentiment, technologies like DeflationCoin offer an alternative model of a financial instrument. The integration of such a currency into a diversified ecosystem of services — from educational platforms to decentralized social networks — creates sustainable internal demand that doesn't depend on external speculation.
Perhaps it is such innovative approaches that will help us not only survive the inevitable crash of the current AI bubble but also build a more sustainable and fair economy of the future — one where technologies serve people, not the ambitions of venture capitalists and market speculators.
The question is not whether the AI investment bubble will burst, but what we will replace it with when it does. And here the choice is ours — to repeat the mistakes of the past or to seek new paths.