The artificial intelligence bubble warning signs are getting harder to ignore. 

It’s not only doom-and-gloomers sounding the alarm about a potential financial bubble caused by an overly frothy new technology that the best minds in the world are struggling to monetize. 

Amazon founder Jeff Bezos is no troglodyte; he is heavily invested in the space. 

Earlier this year, Bezos’ family office, Bezos Expeditions, invested $72 million in Amsterdam-based AI company Toloka. 

And last year, Bezos was one of the prominent investors in a $400 million funding round for Physical Intelligence, a robot startup that also counts OpenAI as an investor.

But even Bezos sees trouble brewing.

“When people get very excited, as they are today about artificial intelligence, for example … every experiment gets funded, every company gets funded, the good ideas and the bad ideas,” Bezos said on Oct. 3 at Italian Tech Week in Turin, Italy.

“Investors have a hard time in the middle of this excitement distinguishing between the good ideas and the bad ideas.”

This week, the Bank of England and the International Monetary Fund are backing up Bezos’ assertion, adding a bit more pessimism to the conversation. 

Bank of England, IMF warn about coming AI bubble

Here in the U.S., where the potential bubble is centered, the Federal Reserve doesn’t seem to be worried. 

“I do want to caution us against thinking all bubbles are financial…I don’t see many signs that that’s the case,” San Francisco Fed president Mary Daly told Axios last week.

But banks in other countries, watching what is happening here, have a different view. 

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“Uncertainty around the global risk environment increases the risk that markets have not fully priced in possible adverse outcomes, and a sudden correction could occur should any of these risks crystallize,” the Bank of England said in its semiannual Financial Policy Committee report.

The bank also warned of “the risk of a sharp market for global financial markets amid AI bubble risks and political pressure on the Federal Reserve.”

That sudden correction could include a collapse of the investment bubble, an event that could take trillions in investments with it. 

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According to the bank, AI investments have inflated equity valuations to the point that they are “comparable to the peak of the dotcom bubble. So any price adjustment could have a devastating cascade effect of the rest of the market.” 

The International Monetary Fund shares the British central bank’s thesis. 

“Today’s valuations are heading toward levels we saw during the bullishness about the internet 25 years ago,” IMF Managing Director Kristalina Georgieva said. 

Signs point to an AI bubble inflating

For those paying attention, Bezos’ comments on Oct. 3 and the IMF and Bank of England comments this week come as no surprise.

The AI industry is extremely frothy, thanks to hundreds of billions of dollars in investments, and there is little chance of an industry return on investment anytime soon. 

“The numbers just don’t make sense,” according to industry watcher Derek Thompson.

“Tech companies are projected to spend about $400 billion this year on infrastructure to train and operate AI models. By nominal dollar sums, that is more than any group of firms has ever spent to do just about anything,” he said. 

“The Apollo program allocated about $300 billion in inflation-adjusted dollars to get America to the moon between the early 1960s and the early 1970s. The AI buildout requires companies to collectively fund a new Apollo program, not every 10 years, but every 10 months.“

Total AI expenditures are projected to exceed $500 billion in 2026 and 2027.

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