$120 billion AI bubble at risk? IBM CEO says AI bubble could burst soon
The Economic Survey 2025-26 warns of a potential AI market crash, citing $120 billion in off-balance sheet spending by tech firms. With the IBM CEO questioning LLM economics, the report suggests a correction could trigger a crisis worse than the 2008 financial meltdown.
The $120 Billion - Data centre spending
Tech companies have moved more than $120 billion of data centre spending off their balance sheets to fund AI infrastructure.
Hidden Debt
These huge sums are being funded using special purpose vehicles financed by Wall Street investors, adding to hidden financial risks.
IBM CEO
The CEO of IBM has openly questioned the economics of Large Language Models (LLM)-based AI, raising doubts about their viability.
Concerns Over a 'Huge Bet'
This scepticism reinforces growing concerns about the financial risks associated with this "huge bet" on artificial intelligence technology.
Risk of Cascading Correction
Given the high leverage involved, a market correction could cause cascading effects across both financial markets and the real economy.
Threat of Systemic Shock
There is a risk of a systemic shock cascade where financial, technological, and geopolitical stresses amplify one another.
Worse Than 2008 Crisis?
If these risks materialise, the Survey warns that the macroeconomic consequences could be worse than the 2008 global financial crisis.
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