Will AI soon trigger the worst Stock Market crash in history?

The euphoria surrounding and fueling artificial intelligence is reminiscent of the worst speculative bubbles of the past. If the promised productivity gains are slow to materialize, the return to reality will be brutal—extremely brutal.

According to several economists, the current situation is even more alarming than it was on the eve of the 1929 stock market crash.

Wall Street sits on a gigantic volcano

The conclusion reached by experts—notably The Telegraph’s economic columnist Russ Mould—is a matter of simple math: the S&P 500, the index that tracks the performance of the 500 largest U.S. companies on the stock market, is so expensive that it costs $41 to generate $1 in profit.

To give you an idea, according to data from Investing.com, the historical average of this ratio hovers around 17.3. On “Black Tuesday” in 1929, it stood at 32.5.

Such a disconnect in prices is—to use a concrete analogy—the financial equivalent of the sea receding before a tsunami. The danger is imminent.

A technological mirage

This insane overvaluation of these companies’ stocks rests on a single promise: AI will revolutionize global productivity. The problem? In the real world, this technology is still largely useless in most professional sectors.

This scenario has a strong sense of “déjà vu.” While the internet in the 1990s and electricity in the 1920s eventually became mainstream, it was only after a total financial collapse and a brutal economic reset.

The verdict

The gap between stock market fantasy and economic reality can be resolved in only two ways: either profits skyrocket, as if by magic, or the market crashes. With the first scenario becoming less and less credible, the next decade risks bringing us a violent replay of the 1930s.