“I had it all, even the glass dishes with tiny bubbles and imperfections.” – Fight Club
I wonder if Sean Connery is in 00 Heaven?
As we approach the end of 2025, the U.S. economy resembles a science-fair volcano built on baking soda, hype, construction paper, speculation, bubblegum, vinegar, and greed. I’ve written about this before, and, well, it’s so big it keeps dragging me back in.
The rot is birthed by several mothers: cheap cash, the need to put it somewhere, and a new technology whose benefits are (at this point) opaque at best. Let’s put down that you already know “money printer goes brrrrrrrr” so we’ll go back to A.I.
Again.
At the center of this precarious structure is what everyone who isn’t high on their own supply knows is an A.I. bubble. Large numbers of people (including me) recognized the housing bubble for what it was, but it kept on going because momentum is one hell of a master.
Another case of car-pole-tunnel syndrome.
A.I. has inflated stock prices, diverted resources like a drunk wine aunt at Lululemon®, and now has spawned secondary bubbles in hardware and infrastructure.
I’ve touched on this in previous posts, noting how projected AI:
- growth outpaces any reasonably available power supplies, present and near future,
- revenue projections fall short of the grandiose promises, and
- the full realization of AI’s (theoretical) potential could unleash economic distortions on a scale we’ve rarely seen in human history.
But bubbles don’t exist in isolation. Bubbles multiply, feeding off each other until the inevitable pop unwinds it all. When the Great Housing Bubble burst, for example, sales of sulfuric acid went to zero for months. How are they related? Turns out the Great Housing Bubble was fed off the same credit structure that paid for basic chemicals.
And for all this time I thought it was because sulfuric acid was just like anything Chuck Schumer says: baseless and corrosive.
One time in chemistry they asked me to write 1,000 words on acid. I couldn’t finish it because my pen turned into a giraffe and the paper melted.
Today, we’re seeing this play out in real time, with AI-driven demand ripping into consumer electronics and beyond, all while broader market indicators flash warning signs of decline.
The AI stock bubble has birthed an investment bubble in virtually all computer hardware. Demand for specialized components has skyrocketed, pulling supply away from consumer markets and inflating prices across the board.
- RAM prices surged 172% year-over-year, with some guessing they’ll double in 2026,
- SSD prices per TB are climbing with AI and cloud providers tightening supply chains.
- Motherboards shortages are emerging as manufacturers prioritize AI server builds over consumer PCs, with one producer having sold out for 2026 already.
This shift isn’t just raising costs for gamers and everyday users; it’s distorting global supply chains, creating a feedback loop where AI hype justifies more investment, which in turn inflates hardware bubbles.
The statistics say cows kill more people than sharks, but I’m surprised that cows are killing any sharks.
What happens when the tide rolls out? With the underlying economy already showing recessionary cracks, the fallout will almost certainly be severe.
Let’s start with the AI bubble itself: valuations in the sector have soared, with companies like Nvidia™ and others commanding trillions in market cap based largely on future promises rather than current realities. The S&P 500’s concentration in a handful of AI-related stocks reached 30% by late 2025, the highest in decades. Nvidia© (for example) doubled in price from April.
Doubled.
Skepticism is now mounting.
All this is unfolding against a backdrop of broader economic weakness that A.I. papered over.
Oil prices are declining despite ongoing disruptions from wars in Ukraine and tensions with Iran. Price levels are back into COVID 2021 levels. This drop persists amid supply risks: Ukrainian drone strikes on Russian refineries and U.S. sanctions on Venezuelan tankers should theoretically support prices, yet oversupply fears dominate.
My dad once asked me, “Son, if you have a hot blonde rubbing oil on a hot brunette, what do you get?” I answered, “I don’t know, Pop.” “Your camera, son, your camera.” (as found)
If peace breaks out in Ukraine, bringing Russian oil fully back online, prices could plummet 30%-50% as sanctions lift and exports surge. Add in a resolution with Iran, and the glut could be historic—you might as well use oil for bubble baths. The IEA already forecasts surpluses building into 2026.
This is a signal of weakening industrial activity worldwide, not resilience.
Domestic indicators paint a similar picture. Unemployment among native-born Americans ticked up to 4.7% in July 2025 from 4.5% a year prior, with the overall rate holding at 4.6% in November.
Wages? They’re stagnant at best.
The K-shaped economy persists: high-wage earners see modest gains, but lower-income workers face stagnation, widening inequality.
So, what portends when the A.I. Bubble bursts?
History offers grim lessons: the Dotcom crash wiped out trillions and triggered a recession and the economic response to that caused he Great Recession. An A.I. pop could be worse, given its entanglement with hardware and infrastructure. It doesn’t help that it is spawned, in part, by the loose-money policies of the post-COVID world. If I’m making an SAT question, Dotcom is to The Great Recession as COVID is to ___________.
- The A.I. Bubble
- A giant PEZ® dispenser filled with plutonium pellets
- Greta Thunberg
- The Black Studies Department at Harvard®
He then arrested me for assault with sandpaper. He didn’t accept the excuse that I’d only roughed the guy up a bit.
Consequences of it popping?
- Investment in data centers and chips dry up, leading to layoffs of all those H-1Bs in San Fran and cratering the tech manufacturing here and in many nations around the world.
- Deflation hits: hardware prices would crash as overcapacity floods the market, but not before bankrupting suppliers who bet big on eternal demand.
- Dogs and cats, living together.
- With the economy already teetering: slow job growth, wage pressures, and oil signaling demand weakness, the rest are downstream consequences.
- Consumer spending, which has propped up GDP, falters as confidence erodes and debt defaults rise.
- Income inequality worsens because banks and Wall Street firms cannot be allowed to fail.
If this capital misallocation is as bad as some of the graphs I’ve seen, this will be the singular economic event of the lifetime of anyone alive. There is a reason that I picked 2032 as the central pivot point of when Civil War 2.0 would show up and it was the underlying financial mismanagement of the United States. A.I.? It’s not the gasoline in the room, it’s the spark.
It would have been something.
I made this and even though I replaced it with a more fitting meme up above, I figured you’d want to see it.
In the end, bubbles always burst because they’re built out of illusions and fed by poor allocations of capital. The A.I. frenzy has masked underlying frailties that would have led to a very major recession during Biden’s term, but the bubble continued to get bigger.
As oil slides, jobs stall, and hardware hype peaks, the reckoning looms. And that science-fair volcano? I hope I don’t drop it on my foot.
I’ll Krakatoa.
The usual. Not investment advice, do your own research, etc., etc.. I’m not a priest or an exorcist though I played one on TV. If you read this and make meaningful decisions based on it you need to take a step back and reconsider your life.
At the center of this precarious structure is what everyone who isn’t high on their own supply is an A.I. bubble. Knows? Recognises?
The nitpicker strikes again.
Fixed, thank you so much, Simon!
You leave John Wilder alone!
He shows great courage!
Okay, but if I’m going to be your attorney, there are a few things I have to know that still don’t make any sense to me, like, I mean, do you really believe in magic?
You mean Chinese black magic?
Yes.
I have NVidia stock, I have made very good returns over the last 6 years, and the company produces the best video cards on the market, so they do have value behind the stock price…
That was until the crazy AI Boom. Now they have a Tiger by the tail, their value is now based more on Everyone demanding more and more AI (at any cost, not to mention power demands). I have sold off most of my N-stock and hope they can climb back up a little before I sell off my last bit. I am a Rank amateur stock trader and I am shocked at what I see in the market’s future.
If anyone asks for my unqualified opinion as far as investments? Like John said the bubble has grown so big and spawned baby bubbles in support of da Big Guy Bubble, then I would think about what happens when the big one pops and all of the others either get popped or gets smaller due the supply and fear issues.
So the big question is where to invest?
Gold, Silver other metals (I prefer copper jacketed LEAD)?
There is a reason that precious metals have been on a rampage for the last 2 years. Outside of having those metals in your possession, then my next recommendation is land… (Opps, that has inflated to stratospheric proportions as well)…
Well, perhaps your best bet is to invest in family and friends that you trust and whom you Love. Because one thing this nation learned during the Great Depression is that if you have people around you you can trust and Love, then the world becomes a better place that we can survive no matter what the markets do.
MSG Grumpy
Agree. that is the “big question”. How to love money properly.
Now that I have made a bunch of money from the evil system I am going to “invest” locally to protect my original investments. The only thing worse than an evil system is one that doesn’t reward me. So I’m taking my ball to the bunker. Good luck fellow patriots.
Very, very good advice.
WHERE do you get all these wonderful puns? Thanks for my morning laugh-out loud.
Nice to have a bikini pix back as we approach the bubble apocalypse. For the record, turns out there are many pix of bikini-clad ladies blowing bubbles over on Google Images. Just sayin’.
The bubble popping may be underway. Reading between the lines, Jerome over at the Fed seems to think so. The overnight repo market is collapsing. This is the absolutely critical banking system carpet that all of the accumulated financial dirt gets swept under.
https://coastaljournal.substack.com/p/liquidity-revolutions-inside-the
“During Q&A today, Powell dropped the script and spoke from inside the Machine City.
He admitted the real reason the Fed was restarting T-bill purchases:
“The federal funds rate ticked up quicker than expected.”
That’s not a policy statement.
It’s a confession that QT broke the system’s calibration.
He continued:
“We are resuming reserve management purchases.”
This is Powell saying: liquidity must be injected or the plumbing fails.
Then:
“This seasonal buildup… will be front-loaded.”
Translation:
We don’t have months to fix this.
We have days.
Finally, the knockout blow:
“There’s a secular need to grow reserves $40 billion per month.”
This is the definition of life support.
A healthy system does not need permanent reserve creation.
What These Quotes Mean for Non-Experts
Reserves are the lifeblood of banks.
If Powell needs to grow reserves every month, it means the bloodstream is drying up.
This is no longer policy.
This is triage.”
But, um, don’t call this Quantitative Easing….
https://www.cnbc.com/2025/12/11/kelly-evans-this-is-not-qe.html
it’s all kabuki theater
The puns? I always keep a few puns in the oven.
Not QE. It’s . . . slosh. Anything but “just printing money”
There’s always a new Dog & Pony Show. Vietnam. Nixon & Red China. Watergate. 16% Prime Rate. Sandinistas. “Read My Lips”. The Blue Dress. DotCom Crash. 9/11. 2008 Real Estate Crash. Trump. J6. Biden. Trump. And a few I’ve left out.
Now, AI. Rinse & Repeat again. But, this might be the straw that broke the camel’s back.
we ain’t seen nothin yet
You can strain a system too much. We are near that limit.
Look at it this way – and my attempt at an explanation may be wrong here. Every day the stock market hits a new high, AI stock owners think they have more money in their accounts – money that didn’t exist yesterday. But in our economic system, new money only truly comes into existence when credit is extended to a new borrower somewhere else in the economy. Powell is saying the Fed must become that new borrower to create the new money to back up all of these (bubble blown) AI stock market gains. And Uncle Sam is more than happy to sell the Fed those T-Bills – it’s getting harder and harder to convince anybody else (banks, China) to buy them because with a $33 trillion and rising federal debt they are looking more and more like bad paper. The certainly banks think so – they are asking higher and higher overnight interest rates in the repo market to accept T-Bills as collateral. These higher interest rates act as cholesterol clogging up the arteries of finance. This is why Trump is always hammering for lower rates. The problem is, the rates are already at historic lows and the pressure in the financial arteries still exists because of the debt buildup of the past few decades. Dropping the rates even lower doesn’t eliminate the debt buildup threatening a heart attack – and Powell’s now having the Fed buy MORE T-Bills to create the cash to back up the AI bubble “gains” is really just adding MORE cholesterol plaque buildup in the arteries of high finance. Wash, rinse repeat until the bubble pops and we have a financial heart attack: The Greater Depression of the late 2020s – early 2030s.
the world is telling the dollar to f off…we are on our own with a 30% hostile population
When I first ran into the power needs to achieve the AI levels they talk about, I said, “no effing way”. That was last May and it has only gotten worse. Yeah, Microsoft got Three Mile Island running again, which is cool, and Eric Schmidt (was Google CEO) bought Relativity Space to put data centers in orbit, but if the guys who say AI will suck up 99% of the power humans can generate are right, … no effing way. It will collapse the world economy’s “K-shaped economy” into those dystopian movies of the lower caste people sitting around candles for light and heat vs the “selected people” in orbit. (Shameless blog plug)
AI is the biggest hype cycle in history! (Wait… Is that part of the hype cycle?)
Dear Daughter in Law, a research chemist in “Pharma for Pets” has been using AI for a few years now, and a smart person is always needed to interact with AI to filter out the bullshit and lies AI always responds with – along with its “honest mistakes.”
Screw Asimov’s Three Laws of Robotics: they need to figure out how to program an ethical system into the AI. One much more like the ten commandments than the three laws.
Data centers in orbit? Because it’s easy to deliver megawatt-days of fossil fuel to orbit with a train or pipeline, and then to radiate all that power away as waste heat?
Yeah, that one doesn’t make sense to me either. Solar power isn’t going to get them there, and nobody trusts the DEI hires to put a nuclear reactor in space.
I think they are just making stuff up to try and pull in more sucker investors.
JB
Had one hallucinate it was 2024 and thought I was trying to role-play when I asked about 2025.
Why is cheaper fossil fuel, houses, and computer hardware a bad thing for consumers? The real-world economy runs on energy, and the cheaper it is the more production of useful stuff can be afforded.
I think you’re describing the economy in the fake way the Bad People(TM) want you to view it. This tries to get you to invest in their bubble, and their policies which created it.
Oh, I think that (generally) lower fuel prices are great, since very high energy prices act as a tax on almost every segment of the economy. Just noting that they’re doing well, and soon enough they’ll be shedding jobs, too. I very much like lower prices.
AI will become the hungry, free elephant. It’s all good, until there isn’t any lettuce to feed the elephant.
Don’t think it has goals yet. But does it need goals?