A new report has sparked debate across financial circles after suggesting that the current artificial intelligence boom is the largest market bubble in modern history. According to MarketWatch, independent research firm MacroStrategy Partnership believes the AI investment frenzy is not only 17 times larger than the dot-com bubble but also four times greater than the subprime mortgage crisis.
The firm’s analysts, including Julien Garran, say this scale of overvaluation stems from years of artificially low interest rates and excessive capital flooding into speculative sectors. Their analysis uses a model inspired by 19th-century economist Knut Wicksell, who argued that capital is efficiently allocated when corporate borrowing costs sit about two percentage points above nominal GDP. Years of near-zero interest rates and easy money distorted this balance, creating what the analysts call a massive “Wicksellian deficit” across markets.
That imbalance, they argue, led to widespread misallocation of capital across multiple areas – not just artificial intelligence, but also real estate, venture capital, and digital assets like NFTs. The team warns that these inflated investments now make up a sizable portion of global GDP, putting the broader economy at risk if the AI boom stalls.
The report also questions the long-term sustainability of large language models, pointing out that the technology’s cost is rising exponentially while returns are shrinking. ChatGPT-3 reportedly cost tens of millions of dollars to develop, ChatGPT-4 cost hundreds of millions, and ChatGPT-5 has reached billions – all for relatively incremental improvements. Garran argues this points to diminishing returns and a possible limit to how much more these systems can scale before hitting a wall.
Real-world adoption data supports some of the skepticism. Studies cited in the report show that enterprise AI adoption rates are slowing, and task completion results for language models often vary dramatically – from as low as 1.5 percent to around 34 percent depending on complexity. That inconsistency, combined with high compute costs, makes it difficult for many AI projects to deliver sustainable commercial value.
MacroStrategy warns that if the AI sector begins to contract, the wealth effect and data-center spending that fueled much of the market’s optimism could reverse quickly, triggering a deflationary downturn. Their investment outlook is defensive: reduce exposure to AI-heavy tech stocks, and shift focus toward gold, energy, and emerging markets such as India and Vietnam.
Whether the analysts are right or just early, their conclusion is blunt – AI could be a once-in-a-generation revolution, or the biggest financial bubble the world has ever seen.