McHenry Times

Recent warnings about a potential bubble in artificial intelligence (AI) development have been gaining attention. In an article on The Motley Fool website, Sam Altman, a leading figure in the AI industry, stated: “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes.” The article continues, "Let that sink in, not some anonymous analyst, not a fringe blogger: Sam Altman, the man who helped ignite this multi-trillion AI frenzy, is telling us: it’s overheated." Another comparison was made to past financial events: “Very similar to what we saw before the dotcom bust in 1998 and 1999.”

Investor’s Business Daily recently reported significant losses among U.S.-listed stocks within the Global X Artificial Intelligence & Technology ETF (AIQ). Since October 29, these stocks have collectively lost $1.8 trillion in value. This drop surpasses the entire value of Meta Platforms and affects more than 70% of AI-related stocks tracked by the ETF. Those stocks that declined fell by an average of 11.6%, which meets the definition of correction territory.

In addition to falling stock values, tech companies now face large investment needs for data centers that may exceed their available resources. According to Morgan Stanley analysts cited by The Wall Street Journal, global data-center capital expenditures could reach $3 trillion through 2028. Only half of this amount might be covered by projected cash flows, leaving a $1.5 trillion financing gap. JPMorgan analysts noted that public bond markets are increasingly supporting unconventional financing tied to data center growth.

The press release suggests investors should review their portfolios for exposure to AI-related investments and consider potential risks.

Turning attention to Illinois, concerns were raised about state-backed incentives for technology development. The author clarified: “I am not, repeat: not, opposed to the development of new technologies and having them land in Illinois. It’s just that too often we hand out incentives to bring companies into the state without telling us what kind of safeguards exist within those incentives to claw back taxpayer money if the deal falls through.”

Illinois has committed to foregoing $1.5 billion more in tax revenues for industries including electric vehicles, data centers, and microchips since its most recent accounting of economic development tax breaks. The statement continued: “Subsidies are tax increases, pure and simple, and do nothing but put the government’s thumb on the scale for the benefit of favored constituencies.” There is concern that unsustainable tax incentives may create vulnerabilities if an AI bubble bursts.

Steven Reick has represented Illinois’ 63rd House District since his election in 2017 as a Republican legislator replacing Jack D. Franks.

The author concluded with an invitation for public feedback on these issues via email.