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Is the AI market about to crash?

Recent reports have led some to speculate that the AI bubble is about to go the way of the dot-com bubble circa March 2000 and burst.

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On a recent episode of Scott Galloway's Prof G Markets podcast, co-host Ed Elson discussed the fears rumbling around an AI-induced crash with Josh Brown, co-founder and CEO of Ritholtz Wealth Management.

They discussed a few key developments that have created this outlook.

In August, OpenAI released ChatGPT-5 to unenthusiastic reviews and users complaining that it was less intuitive than GPT-4, leading to the company reinstating the legacy model for paying customers, according to CNBC. (1)

OpenAI CEO Sam Altman also made waves for saying AI is in a bubble.

“When bubbles happen, smart people get overexcited about a kernel of truth,” Altman told reporters in August. (2)“Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes.”

Then, The Information reported that Meta was undergoing a fourth restructuring of its AI efforts in just six months, with downsizing on the horizon. (3) Finally, MIT released a report that found 95% of generative AI pilots at companies are failing, as reported by Fortune. (4)

All this doom and gloom led to a notable drop in some AI stocks like C3 (NYSE: AI), which sank by 28.2% in August.

“These reports fueled fear in the market and triggered a sell-off in US tech, sending every mega cap stock on a multi-day decline,” Elson said on the podcast.“The Nasdaq fell more than 3% and the S&P 500 shed $1 trillion in value.”

Even so, money continues to flow into the industry. On Oct. 6, OpenAI signed a multibillion-dollar deal with chipmaker AMD, which skyrocketed AMD shares by 38%. (5)

Josh Brown's take on the AI bubble

Elson asked Brown for his take on the bubble fears.

Brown was quick to note that“these things happen in threes,” telling Elson about a similar experience he had right before the dot-com bubble burst back in 2000, when, in the span of a few weeks, some alarm bells were ringing.

One red flag Brown points to was similar to Sam Altman's bubble statement when, in 2000, CEO of Microsoft Bill Gates“said he wouldn't buy his own stock... he was talking about how expensive valuations for tech stocks were and he included his own company.”

In retrospect, he views that as the warning sign many ignored.

“Of course nobody wanted to hear that,” Brown said.“You had these touchstone events and you can't really point to one of them and say that was the moment - but in hindsight you can go back and you could be like 'Oh, we should have known.'”

But that doesn't mean he fears the same is about to happen to AI stocks.

“The things that you laid out to me don't spell a death knell for the AI theme,” Brown said.“My personal belief is we could run into the end of the decade at least with all the momentum and the money that's being spent - but I think the past couple of days' stock price action in the market tells investors how overowned this theme is and how easy it is to now spook the herd. It doesn't take much.”

Brown also made it clear that he agrees with the overall sentiment that AI stocks have reached a saturation point.

“If you think AI is going to be transformative for society and if you are hugely bullish on the theme... you should consider the fact that everybody else agrees with you already,” he said.“By professing your bullishness for AI, you're not saying anything that anyone doesn't already know.”

Elson mentioned that what he described sounds like a bubble, and Brown agreed - but noted that we don't know where we are in the bubble.

“It could be 1997, it doesn't have to be March of 2000 yet. Of course it's a bubble - there's a capex bubble every generation,” he said.“Not every capex bubble has to result in a generational crash. You could just have a bear market follow this - and what if it starts three years from now? Think of all the money that you are missing out on.”

As a wealth manager, he's not hiding the reality of the bubble from his clients.

“I think we're kind of in a fragile state now, and I think it's okay - stocks are supposed to be volatile.”

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America - and that 'anyone' can do it

How to hedge against a potential market crash

While an AI-fueled market crash may or may not be on the horizon, it's a good idea to consider alternative investment options that can help you hedge against it when the outlook is so mixed.

One alternative investment that has done quite well this year is gold, which has seen its value increase by over 44% (6), reaching an all-time high of over $4,000 per ounce in early October. (7) This high has blown past previous reporting by JP Morgan, which estimated it would take until Q2 of 2026 to hit this benchmark. (8)

If gold is something you want to explore, you could consider working with Thor Metals.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainties.

To learn more, you can get a free information guide that includes details on how to get up to $20,000 in free metals on qualifying purchases.

Another alternative is the private real estate market, where you can forgo landlord duties but still benefit from the gains. Blackstone notes that private real estate has provided a +4% annual yield during 16 out of the last 20 years, outpacing inflation. (9)

You can tap into the private real estate market by investing in shares of vacation homes or rental properties through Arrived.

Backed by world-class investors like Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, potentially providing passive real estate income without the hassle of being a landlord.

Browse through their vetted properties to find potential investments that appeal to you. Once you find your ideal property, you can start investing with as little as $100.

If commercial real estate sounds more appealing, you can get access to this $22.5 trillion sector through First National Realty Partners (FNRP).

FNRP provides accredited investors access to this diversification strategy through grocery-anchored commercial properties like Whole Foods, Kroger and Walmart.

With a minimum investment of $50,000, you can own a share of properties leased by these commercial brands and other grocers serving your community.

Answer a few quick questions about your investment preferences to start browsing their complete list of available properties today.

Finally, a skilled advisor can help ensure your portfolio is set up with an optimally diversified asset mix, hedging against anything AI has in store for the market. According to a report from Vanguard, people who work with financial advisors experience a 3% increase in net returns. (8)

If you're not sure where to find a qualified advisor, check out FinancialAdvisor, a free online service that helps you find a financial advisor who can help you create a plan to reach your financial goals. Just answer a few questions and their extensive online database will match you with a few vetted advisors based on your answers.

You can view advisor profiles, read past client reviews, and schedule an initial consultation for free with no obligation to hire.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

CNBC (1, 2 ); Reuters (3 ); Fortune (4 ); Bloomberg (5 ); Forbes (6 ); APMEX (7 ); JP Morgan (8 ); Blackstone (9 ); Vanguard (10 );

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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