The billion-dollar time bomb with artificial intelligence: How Meta, Microsoft and OpenAI are creating a new tech bubble
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Published on: October 5, 2025 / Updated on: October 5, 2025 – Author: Konrad Wolfenstein
The billion-dollar time bomb with artificial intelligence: How Meta, Microsoft, and OpenAI are creating a new tech bubble – Image: Xpert.Digital
The $200 Billion Bet: Why the AI Boom Could End in Disaster
“Uncanny parallels”: Why the AI bubble now surpasses even the dotcom era
The tech world is in a frenzy. Driven by the promise of artificial intelligence, there seem to be no limits. But behind the gleaming facade of ChatGPT, groundbreaking innovations, and exploding stock prices, a storm is brewing that has the potential to shake the global economy. Giants like Meta, Microsoft, and OpenAI are pumping hundreds of billions of dollars into a technology whose economic benefits are still up in the air—creating a speculative bubble of historic proportions.
The parallels to the dot-com bubble of the late 1990s are unmistakable and alarming. Renowned investment banks are sounding the alarm, legendary investors like Warren Buffett are holding back, and the warning signs are piling up: astronomical valuations without profitable business models, questionable circular finance, and an energy hunger that is pushing our planet's physical limits. While an unprecedented arms race for the most expensive infrastructure rages in the West, disruptive players from China are demonstrating that comparable results are possible at a fraction of the cost—thus calling into question the entire foundation of the boom. This article delves deep into the epicenter of the AI bubble, uncovering its fragile financial structures, and showing why the impending boom could be louder than anything we've known before.
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The dangerous game with artificial intelligence
The tech world is on the brink of an unprecedented financial catastrophe. What began as an artificial intelligence revolution is increasingly evolving into a dangerous speculative game that bears frightening parallels to the dot-com bubble of the late 1990s. Meta, Microsoft, OpenAI, and other tech giants are investing hundreds of billions of dollars in a technology whose commercial viability remains unclear.
The warning signs are mounting: Goldman Sachs, Morgan Stanley, and other renowned investment banks are warning of a massive misallocation of capital. While share prices of major technology companies are reaching new highs, doubts about the sustainability of this trend are growing. Jim Chanos, one of the financial world's most well-known short sellers, is already drawing direct parallels to the speculative excesses of the turn of the millennium.
The astronomical investments of the tech giants
The numbers are staggering: Meta, Microsoft, Amazon, and Alphabet alone plan to invest over $215 billion in AI projects by 2025. This is roughly equivalent to the gross domestic product of countries like Finland or Chile. Microsoft spends $1 billion a week building new data centers, employing 100,000 construction workers—three times the number needed to build a pyramid.
Meta CEO Mark Zuckerberg announced plans to invest at least $66 billion in AI infrastructure in 2025, an increase of $2 billion over the original plan. Google's parent company Alphabet increased its capital expenditures for 2025 by $10 billion to $85 billion. These expenditures have more than tripled since 2021 and are reaching economically relevant dimensions.
Investments are primarily going into the construction of gigantic data centers equipped with specialized AI chips from Nvidia. A single AI server with eight Nvidia Blackwell chips costs at least a million dollars. Prices have reached a level that can no longer be justified by the real benefits of this technology.
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OpenAI: The burning mountain of money at the center of the bubble
At the epicenter of this development is OpenAI, the company behind ChatGPT. The company's financial situation reveals the full extent of the problem: OpenAI expects losses of five billion dollars in 2024, with revenue of just 3.7 billion dollars. This loss ratio is exceptionally high, even for a fast-growing technology company.
OpenAI's cost structure demonstrates why profitable AI is so elusive: $700,000 per day for server infrastructure alone, $7 billion annually for training AI models, and $1.7 billion in personnel costs. Internal projections show that OpenAI may not become profitable until 2029—and will accumulate losses totaling $44 billion by then.
This dramatic financial situation is forcing OpenAI to take drastic measures: The monthly fee for ChatGPT Plus is to gradually increase from the current $20 to $44 over the next five years. At the same time, the company is constantly seeking new investors – the current financing round is expected to give OpenAI a valuation of $150 billion, even though the company is deeply in the red.
The dangerous game of circular finance
Particularly alarming is the way these investments are being financed. Nvidia, the biggest beneficiary of the AI boom, is now investing $100 billion in OpenAI itself—a deal criticized by experts as circular financing. OpenAI is buying Nvidia chips, Nvidia is investing in OpenAI, and both companies are benefiting from rising valuations based on ever-larger investments.
Jay Goldberg of D2D Advisory compared this constellation to parents co-signing their children's first mortgage—a system that only works as long as everyone involved continues to invest. Peter Boockvar of One Point BFG draws direct parallels to Lucent and Nortel, two companies that used similar vendor financing to fake growth during the dot-com bubble before collapsing.
The Chinese Challenge: DeepSeek Shakes the System
While Western companies are investing hundreds of billions in increasingly expensive AI infrastructure, the Chinese startup DeepSeek demonstrated that comparable results are possible with a fraction of the resources. The AI model R1 cost only $294,000 to develop and was trained on outdated Nvidia H800 chips.
By comparison, OpenAI spent over $100 million training GPT-4, while DeepSeek developed a competitive model for less than $300,000. This discrepancy calls into question the entire investment logic of the Western AI industry and could result in massive write-downs.
DeepSeek's success led to a temporary drop in Nvidia's share price by nearly $600 billion in market capitalization and unsettled the entire industry. Microsoft CEO Satya Nadella admitted that the developments in China must be taken very seriously.
The energy crisis as a limiting factor
Another critical aspect of the AI bubble is exploding energy consumption. Data centers in the US already consumed 176 terawatt-hours in 2023, and this figure could rise to 325 to 580 terawatt-hours by 2028. This would correspond to up to 12 percent of total US electricity consumption.
A modern AI data center consumes as much electricity as 100,000 households, and particularly large facilities consume twenty times more. Global data center electricity consumption could double by 2030, reaching the level equivalent to the energy consumption of all of Japan.
This development is already reaching its physical limits: Popular locations like Northern Virginia are overburdened, and tech companies are moving to second- and third-tier regions. New buildings scheduled for completion in 2028 are already fully booked, although it remains unclear whether the massive AI demand will even materialize.
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AI vs. Dotcom: Is the biggest tech bubble of all time looming? Who will survive the AI burst?
Warren Buffett's cautious positioning
While many investors are succumbing to the AI hype, Warren Buffett remains characteristically cautious. The portfolio of his investment company, Berkshire Hathaway, demonstrates a strategic reluctance toward direct AI investments. Instead, he is focusing on established technology companies like Apple and Amazon, which could benefit from AI without being exclusively dependent on it.
Buffett's approach reflects the wisdom of an experienced investor who has already experienced several speculative bubbles. His focus on companies with diversified business models and sustainable competitive advantages stands in stark contrast to the speculative excesses of pure-play AI stocks.
The parallels to the dotcom bubble are becoming obvious
The similarities to the dot-com bubble of the late 1990s are striking. Just as the internet was then, AI is now being hailed as a revolutionary technology that will render all traditional business models obsolete. According to experts, valuations have already surpassed the highs of the dot-com era.
Henry Blodget, a former star analyst from the dot-com era, warns of uncanny parallels. Both technologies—the internet and AI—will have impacts far beyond the tech industry. Investments in AI infrastructure will amount to at least $400 billion in 2024 alone, massively boosting the global economy and stock markets.
Torsten Sløk, Chief Economist at Apollo Global Management, goes even further: Current overvaluations in the AI sector even exceed those of the dot-com bubble in the late 1990s. The concentration on a few large technology companies is a fatal reminder of the late 1990s, when internet companies gained significant value in a very short time before many collapsed in the ensuing crisis.
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The structural differences exacerbate the risk
Paradoxically, the structural differences from the dot-com bubble could make today's situation even more dangerous. Unlike then, the massive investments are financed not with debt, but with the profits of the tech giants. This means the companies can hold out for longer periods, leading to even greater misallocations.
Today's tech companies are profitable and have strong balance sheets, allowing them to continue investing for years even if they don't pay off. This apparent strength could turn out to be a weakness, as it prevents markets from correcting prematurely.
Another critical difference: While during the dot-com era, speculation was primarily carried out by private investors, today institutional investors and pension funds are heavily invested in AI stocks. A bursting of the bubble would therefore have far-reaching systemic consequences.
Financing structures are becoming increasingly fragile
The development of financing structures is particularly worrying. Tech companies that have been debt-free for years are increasingly taking out loans. In the first half of 2025, the volume of investment-grade loans by tech companies was 70 percent higher than in the previous year.
Microsoft has reduced its cash reserves, but its capital lease liabilities—a form of data center debt—have nearly tripled to $46 billion. Another $93 billion of these liabilities aren't even listed on its balance sheet. Meta is negotiating $30 billion in loans with private lenders.
Smaller AI companies, especially those like CoreWeave and Fluidstack, are taking on massive debt to buy Nvidia chips and staking these chips as collateral for further loans. This pyramid scheme only works as long as chip prices continue to rise and AI demand grows.
The warning signals are piling up
Experts identify several classic warning signs of a speculative bubble. Prices for AI infrastructure are rising sharply without a corresponding improvement in the underlying fundamentals. Private investors without expertise are investing heavily in AI stocks, and Nvidia stock has become one of the most popular stocks for private investors.
Typical statements like "this time everything is different" or "prices will continue to rise" are widespread. Euphoria has reached a level where rational valuation criteria are overridden.
In a recent study, Goldman Sachs warns of a "hyped-up atmosphere" in which large technology companies "live in fear of disruption and deploy capital to act both offensively and defensively." The scale of investment is now comparable to that of mid-sized economies.
The inevitable correction and its consequences
When the AI bubble bursts—and the question is not if, but when—the effects will be devastating. Not all of the hyped-up companies will survive. As was the case after the dot-com bubble burst, there will ultimately be only a handful of winners.
Microsoft, Meta, and Google could survive a crash because their business models are based on multiple pillars. Nvidia will likely survive because its chips are needed beyond AI. For smaller AI labs like Anthropic, Mistral AI, and the many data center providers, the outlook looks significantly bleaker.
Morgan Stanley analysts warn that a price setback could begin "at any moment and without warning." While traditionally defensive assets are overpriced due to years of money printing, investors may not find a safe haven.
The way out of the crisis
Paradoxically, a bursting of the AI bubble could have positive long-term effects. If the focus on ever-increasing metrics and marketing pressure disappear, AI use could be limited to areas that offer real added value.
Exaggerated expectations would be replaced by more realistic assessments. Companies would have to demonstrate that their AI investments actually lead to productivity gains and cost savings, rather than just delivering impressive demonstrations.
History teaches us that even after speculative bubbles burst, the underlying technology often survives and thrives. Amazon and Google emerged from the ashes of the dot-com bubble and became the most valuable companies in the world. Similarly, a more sustainable and profitable ecosystem could emerge after an AI fix.
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The calm before the storm
The current situation is fatally reminiscent of the months before the dot-com bubble burst. All the warning signs are there: astronomical valuations, circular financing, exaggerated expectations, and a widespread attitude that "everything is different this time."
Meta, Microsoft, OpenAI, and the other protagonists of this story have created a time bomb whose explosive power could surpass the dot-com bubble. The billions pumped into this speculative bubble every day will not disappear without a trace—they will leave a trail of destruction through the technology industry and the global economy.
Smart investors should prepare for this inevitable correction now and diversify their portfolios accordingly. Because when this bubble bursts, the bang will be heard far and wide.
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