AI is a planet-sized bubble, Microsoft's stock drop is a warning of what's ahead: Gordon

""The AI bubble is almost as big as the planet Jupiter," Gordon, an entrepreneurship professor at the University of Michigan's Ross School of Business, said in a Wednesday email to Business Insider. "When it bursts, the debris will be everywhere," he continued. "Big, institutional investors will be hit with it, and so will individual investors who bet the bubble would get even bigger.""

""Microsoft's shares sank "because of the truckloads of cash it is investing in AI," Gordon said. "That is a warning of the burst to come." The cloud-computing titan's net cash used in investing surged 95% year-on-year to over $57 billion in the six months to December. That was fueled by its addition of $49 billion worth of property and equipment such as data centers.""

""Prior to their post-earnings slump, Microsoft's shares had roughly doubled since the start of 2023, lifting the company's market capitalization to over $3.5 trillion. Shares of chipmaker Nvidia have vaulted 13-fold, valuing the company at close to $4.7 trillion - more than 20 times its projected revenue for the fiscal year ended January 25. Palantir stock has jumped about 25-fold, giving the data-analysis company a $375 billion market value, or around 85 times its forecasted revenue for 2025.""

Rampant speculation and massive overinvestment in AI have produced a planet-sized financial bubble that poses systemic risk to markets. Microsoft ramped AI-related investing, driving six-month investing cash use up 95% year-on-year to over $57 billion and adding $49 billion in property and equipment, while its market capitalization exceeded $3.5 trillion after shares roughly doubled since early 2023. Nvidia surged about 13-fold to nearly $4.7 trillion, trading at more than 20 times projected revenue, and Palantir rose roughly 25-fold to about $375 billion, near 85 times forecasted 2025 revenue. Extreme valuations and concentrated capital increase the likelihood of widespread portfolio losses if the bubble reverses.

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