More on AI and Wall Street

Picking up from last Thursday. 

Meta, Amazon, Alphabet, and Microsoft are on track to invest hundreds of billions of dollars in AI this year, working under the assumption that this isn’t just the next big thing, it is the big thing, a development that is about to start pumping out unprecedented amounts of money in the very near future.

The timeline is important. Servers have to be replaced every few years, unlike steel railway track or fiber-optic cables. If this technology doesn’t start delivering on its promise in the next five years or so, most of those hundreds of billions of dollars will have been largely wasted.

Whether you call it a boom or a bubble, AI has done a great deal to prop up the market and stimulate the economy both directly through capital expenditures and indirectly through the wealth effect. If we see a major correction in the sector, the results will be painful, not just because bubbles popping are always painful, but because we have an administration that lacks the competence to handle the crisis and is likely to overreact in some possibly dangerous ways. 

With all that in mind, take a look at this recent piece from the sharp and reliable Allison Morrow.

Rather suddenly, there’s been a vibe shift around artificial intelligence, the tech that’s hypnotized Wall Street and inspired cultish devotion across Silicon Valley over the past three years.

And while it’s too soon to declare August 2025 the start of the AI winter, or the AI correction, or the AI bubble bursting, or whatever slowdown metaphor you prefer, it is undeniable that a series of industry stumbles is making investors, businesses and customers do a double-take.  

Among them:

• Meta, which was recently shelling out $100 million signing bonuses for AI talent, has instituted a hiring freeze and is reportedly looking at downsizing its AI division.
• Sam Altman, the CEO of OpenAI and the industry’s biggest hype man, is floating the word “bubble” in media interviews.
• ChatGPT-5, billed by OpenAI as a PhD-level game-changer, is a flop.
• Coreweave, a cloud computing company backed by Nvidia, has shed nearly 40% of its value in just over a week.
• Researchers at MIT published a report showing that 95% of the generative AI programs launched by companies failed to do the main thing they were intended for — ginning up more revenue.
• Anthropic and OpenAI have struck deals to give their products to the US government for next to nothing — even as they are burning through cash and lack demonstrable paths to profitability.

All of that has sent traders rushing to buy “disaster puts” — options that act as a kind of insurance for when the market drops — in case we’re about to relive the late-90s dot-com bust. Per Bloomberg, investors aren’t just preparing for a pullback, they’re bracing for a nosedive.

“I suspect this will lead to a larger correction,” Mike O’Rourke, chief market strategist at JonesTrading, told me, noting that Meta dangling NFL-like compensation packages to attract AI engineers was “a sign the spending was going over the top.”