A new MIT study shows that nearly 95% of generative AI projects are failing to generate profits, while only 5% are achieving notable revenue growth.
Despite huge investments, many firms struggle to show real productivity gains from AI, raising fears that the current boom may soon collapse like the dot-com bubble of the 1990s.
Massive capital inflows have fuelled the AI rush. In 2025, private AI investment in the United States alone reached $109.1 billion, boosting related sectors such as chip production and data centres.
Much of the S&P 500’s growth has been linked to AI, especially to companies like NVIDIA, whose stock rose sharply due to optimism about AI’s potential.
However, the IMF has warned that valuations now resemble those seen before the dot-com crash, where overhyped internet companies collapsed after failing to deliver profits.
The main difference today is that big tech firms are funding AI growth from their own earnings rather than external capital.
Yet, experts like Ray Dalio and Sam Altman caution that speculation has outpaced genuine innovation. If the AI bubble bursts, it could deeply affect the US economy, which relies heavily on AI-driven spending for growth.
A sharp fall in AI investment might reduce wealth, cut corporate budgets, slow innovation, and even trigger layoffs, especially in tech-heavy regions.
Globally, an AI crash could weaken trade and investment, especially in countries dependent on technology exports.
India is at a key stage in the global AI revolution. While developed countries like the United States lead in AI investment, India’s growing technology sector makes it a major future beneficiary.
To benefit fully, India must adopt stable policies and responsible investment practices.
As Amara’s Law suggests, people often overestimate technology’s short-term effects and underestimate its long-term power.
While a bubble burst may cause short-term pain, AI’s lasting benefits will likely transform economies if guided by careful governance, scaled up innovation and sustainable investment.
