First, we have Josh Marshall noting that AI is gobbling up computer memory. This goes along with the mass consumption of energy and fresh water that we already know about. This is something that contrasts - a bit - with other bubbles. The Dot Com bubble, the Real Estate bubble, the various railroad bubbles: none of them warped other sectors of the economy quite so profoundly. Railroads spiked the need for steel, but that actually just spurred the development of the steel industry that spilled over beneficially to other sectors like construction. Real Estate sucked up money, but the home building spurt didn't really warp other sectors quite so much. If you've seen your energy bill spike, you're seeing this AI effect.
Krugman speaks about how AI is largely tracking with predictions about interest rates. By comparing it to the Dotcom crash, he shows how even as the NASDAQ was bleeding out, they had rallies corresponding to interest rates changes. In short, as long as the easy money might continue to flow, the bubble might persist.
My own theory is that crypto functions as a cash flow operation for AI, as if you have access to the awesome computing power of AI chips, you could very easily find a way to raise cash off the volatility of crypto and even meme coins. As the bubble starts to get shaky, principles look for a way to salvage their balance sheets. Again - just a theory but - I thought the massive oil price spike in 2008 was finance bros manipulating the market to bring some quick cash onto their books.
There is, no doubt, some role that this massive advance in computing power will have in the future that will be beneficial to the human race. However, I'd wager in the short term we are crushing massive amounts of resources, warping the macroeconomy and creating a ticking bomb in the economy for more realistic fake porn and the ability of middle schoolers to cheat on their book reports.
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