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[ It's not just the CBA, who yesterday rescinded a decision to remove a
bunch of people, after having it pointed out that they'd mis-diagnosed a
business problem and mis-specified an AI solution.
[ Thanks to Stephen, on the Link (Internet policy-watcher's) list.
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Subject: [LINK] The warning signs the AI bubble is about to burst
Date: Thu, 21 Aug 2025 22:11:47 +0930
From: Stephen Loosley <[email protected]>
To: link <[email protected]>
The warning signs the AI bubble is about to burst
Shock sell-off after study warns most investments in artificial
intelligence get zero returns
Matthew Field
The [London] Daily Telegraph
20 August 2025
https://www.telegraph.co.uk/gift/306a41e3f107c539
“When will the internet bubble burst?” the cover story of Barron’s asked
on March 20 2000. “That unpleasant popping sound is likely to be heard
before the end of this year.”
In fact, that same day, one of the most high-profile tech businesses of
the moment suffered a share price plunge of 60pc. A flood of other
collapses followed, evaporating trillions of dollars.
Now, some on Wall Street fear that “unpleasant popping sound” may be
imminent for the artificial intelligence (AI) boom.
On Tuesday, tech stocks suffered a shock sell-off after a report from
Massachusetts Institute of Technology (MIT) researchers warned that the
vast majority of AI investments were yielding “zero return” for businesses.
“Despite $30-40bn (£22-30bn) in enterprise investment into
Gen[erative]AI, this report uncovers a surprising result in that 95pc of
organisations are getting zero return,” MIT academics wrote.
Shares in Nvidia – the $4tn company that has powered the AI boom –
dropped by 3.5pc, while data giant Palantir fell by 9pc.
MIT’s findings threaten to be the pin that pops the tech stock market
bubble, which has added trillions of dollars to the value of US stocks.
Since the launch of ChatGPT in 2022, Silicon Valley has been evangelical
that AI chatbots will transform the economy. Executives have spent
billions on tools for their staff as a result and predicted massive
cost-savings.
But the promised AI revolution has stalled, MIT’s report suggested.
After surveying 150 business leaders and 350 employees, MIT found that
“just 5pc of integrated AI pilots are extracting millions in value,
while the vast majority remain stuck with no measurable P&L [profit and
loss] impact”.
“Sounds about right for a bubble,” said Marko Kolanovic, former head of
research at JP Morgan.
MIT also found that despite widespread investment in AI software, half
of projects ended in failure. It said 80pc of companies had explored AI
technology but just 40pc deployed it.
It added that “enterprise grade systems” were being “quietly rejected”
by major businesses and only “20pc reached pilot stage and just 5pc
reached production”.
The report, from the US university’s Nanda AI project, went on to argue
that many employees in fact want to use AI but are turning to consumer
products such as ChatGPT on their own dime, rather than relying on
expensive or unwieldy corporate AI tools.
The report insisted that “AI is already transforming work, just not
through official channels” – but its headline finding that nearly all
investment by businesses is going to waste could not have landed at a
more delicate moment.
Despite being one of the biggest beneficiaries of the AI boom – with
investors reportedly exploring a $500bn valuation for his start-up
OpenAI – Sam Altman last weekend refused to dismiss concerns that tech
stocks are in a bubble.
“Are investors overexcited? My opinion is yes,” the ChatGPT chief
executive told reporters at a private dinner, adding that some people
stood to lose a “phenomenal amount of money”.
Investors fear that one of those losers could be SoftBank, the Japanese
tech giant that has invested billions in OpenAI. Its shares fell by 7pc
on Tuesday.
Days earlier, OpenAI underwhelmed observers with the launch of its
much-hyped ChatGPT-5 model. Many users were disappointed and urged the
company to bring back its earlier technology. The gains of the new
chatbot have been, in the opinion of many users, incremental at best.
The stakes in all of this are incredibly high. Morgan Stanley has
predicted that data centre investment will reach $3tn over the next
three years, heavily fuelled by debt. Almost all of that capacity is
intended to fuel an expected surge in AI use.
Another prediction from the bank this week argued that AI would add
$16tn to the S&P 500 thanks to a 40pc saving in salary costs driven by
job cuts and efficiencies. If MIT’s report is correct, such savings may
be unrealistic.
In a sign that even true believers think the AI market may be out over
its skis, Meta this week announced a reorganisation of its AI division
that will see it downsize its headcount, the New York Times reported.
Mark Zuckerberg, the company’s founder, has been one of the splashiest
spenders in the market to date, throwing hundreds of millions of dollars
at AI engineers in an effort to lure them to Meta.
Despite the jitters, this week’s sell-off has yet to shift from a market
correction to a market rout. Some believe it is merely a speed bump.
Dan Ives, a technology analyst at Wedbush Securities, said in a note:
“Skeptics of tech rally will be proven wrong (again).”
Next week, Nvidia – the world’s largest company by valuation – will
report its results and could shed light on the state of AI investment by
some of the world’s biggest companies. Its profits and revenues have
beat Wall Street forecasts nearly every quarter over the last two years.
“In our view the tech bull cycle will be well intact at least for
another two to three years,” Ives said.
Still, ears are now straining for the ominous sound of a pop.
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Roger Clarke mailto:[email protected]
T: +61 2 6288 6916 http://www.xamax.com.au http://www.rogerclarke.com
Xamax Consultancy Pty Ltd 78 Sidaway St, Chapman ACT 2611 AUSTRALIA
Visiting Professorial Fellow UNSW Law & Justice
Visiting Professor in Computer Science Australian National University
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