The current artificial intelligence (AI) boom has provided a major lift to the stock markets and economy this year. But it also carries at least one major risk: that the AI bubble will burst in much the same way that the dot-com bubble burst a quarter-century ago.
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If that happens with AI, the damage to the economy and markets could be substantial. What exactly would happen if the AI bubble bursts? We asked Grok that question and below is what it had to say.
Also here is how AI is changing wealth, according to an expert.
The Long Arm of AI
To understand the potential impact of an AI collapse, it helps to know just how big AI is right now in terms of its impact on the markets and economy.
Economists at BNP Paribas estimate that AI-related investments contributed to about 25% of U.S. GDP growth during first two quarters of 2025, Barron’s reported.
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Meanwhile, 10 leading AI stocks — Apple, Amazon, Alphabet, Broadcom, Meta, Microsoft, Nvidia, Oracle, Palantir and Tesla — accounted for nearly 60% of the S&P 500’s $7.58 trillion market cap gain through Oct. 22, 2025.
That doesn’t even include 10 AI startups that gained nearly $1 trillion in market value over the course of year without even turning a profit, according to a Financial Times report cited by CNN.
Grok’s Take
Grok had an interesting note in its analysis of the AI impact. “Trillions of dollars have poured into AI companies, data centers and related infrastructure, driving 75% of S&P 500 gains and making AI stocks like Nvidia’s valuation exceed $5 trillion,” the AI chatbot said.
But such massive growth is “increasingly seen as unsustainable, with companies burning billions in cash while struggling to generate proportional revenue or real-world value,” Grok added.
That view is shared by Julien Garran, partner at UK-based MacroStrategy Partnership.
As CNN reported, Garran recently published a report claiming that AI has contributed to the “most dangerous bubble” we’ve ever experienced — one he said could be 17 times bigger than the dot-com bubble and four times bigger than the 2008 real-estate bubble.
What Will Happen If the AI Bubble Bursts?
An AI burst would be a “massive but not necessarily economy-wide” catastrophe, according to Grok. That’s mainly because AI investments are heavily concentrated in technology rather than broadly distributed like during the 2008 housing crisis.
Even so, Americans would stand to lose a whole lot of money.
“Estimates suggest a potential $40 trillion wipeout from the Nasdaq, dwarfing the $3.6 trillion lost in the dot-com crash, with a 20% to 30% drop in the S&P 500 and a possible recession triggered by curtailed AI capital spending,” Grok explained. “A contraction could vaporize trillions in investments, torpedo retirement funds and increase costs for essentials like utilities without offsetting benefits.”
That doesn’t necessarily mean a crash is inevitable. Here are three possible outcomes, according to Grok:
- Catastrophic crash (25% to 35% probability): A full burst leads to recession, mass failures and trillions lost, but contained to tech.
- Soft landing (35% probability): Gradual 60% to 70% valuation decline over years, with AI “integrating productively.”
- Continued boom (40% probability): If AI scales and delivers decent returns on investment, the bubble “deflates” into sustainable growth.
An AI bubble burst also “could exacerbate unemployment” and lead to tens of thousands of tech-related job losses.
What To Do Now
To prepare for a potential AI bubble burst, Grok offers these recommendations:
- Cut your AI equity exposure below 20% (down from 30% to 50% in most indexes).
- “Load up” on value stocks, international stocks, small-caps, commodities and Treasury Inflation-Protected Securities (TIPS).
- Move cash to FDIC-insured high-yield savings accounts.
- Avoid AI-heavy fintech apps such as Robinhood and Webull and move your money to traditional brokerages like Schwab, Fidelity or Vanguard.
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This article originally appeared on GOBankingRates.com: I Asked Grok What Will Happen If the AI Bubble Bursts
