The question isn't whether the AI bubble will burst but what the fallout will be

"The California Gold Rush left an outsized imprint on America. Some 300,000 people flocked there from 1848 to 1955, from as far away as the Ottoman Empire. Prospectors massacred Indigenous people to take the gold from their lands in the Sierra Nevada mountains. And they boosted the economies of nearby states and faraway countries from whence they bought their supplies. Gold provided the motivation for California a former Mexican territory then controlled by the US military to become a state with laws of its own."

"California is going through another investment rush these days. This time it's centered in Silicon Valley. The pot of gold is more elusive but potentially much bigger: Artificial Intelligence. What this rush leaves in its wake will shape the long-term future of civilization or maybe not? The question everyone seems to be asking is: is AI a bubble? Lots of people seem to think so, including Open AI's Sam Altman and the Bank of England."

"How else to explain Nvidia's stock price, which more than doubled from April to November, based entirely on the expectation, nay hope, that AI will produce a super-intelligence that can do everything humans do but better. Nvidia like Levi Strauss back in the day is at least selling something: computer chips. The valuations of many of the other AI plays like Open AI or Anthropic are based largely on the dream."

The California Gold Rush drew roughly 300,000 people between 1848 and 1855 from around the world, led to massacres of Indigenous peoples, and reshaped regional and global economies. Few prospectors became wealthy; merchants supplying tools and provisions captured most profits, exemplified by Levi Strauss. A modern investment rush in Silicon Valley centers on artificial intelligence with far larger potential returns and greater uncertainty. Hardware companies like Nvidia benefit tangibly, while many AI startups receive sky-high valuations based largely on speculative hopes. The central analytical challenge is determining the bubble's type, its likely economic damage, and the durable value that will remain if it bursts.

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