$512 Billion Wiped Out in a Day... 'As Big as Jupiter' AI Bubble Fears Resurface [Into the World of AI]

Sorting Out Winners and Losers Among AI Companies Begins in Earnest
Hassabis, CEO of Google DeepMind: "Even if the bubble bursts, we will be fine"

"The artificial intelligence (AI) bubble is as big as the planet Jupiter, and if it bursts, investors could suffer losses. The pain from an AI bubble burst would surpass that of the dot-com collapse in 2000." (Eric Gordon, Professor at the University of Michigan)

Microsoft's earnings announcement has hit the New York Stock Exchange hard, reigniting the artificial intelligence (AI) bubble theory. On January 29 (local time), Microsoft's fourth-quarter (October-December 2025) results fell short of expectations, causing its stock price to plummet and dragging down other major software companies, which dampened investor sentiment. The recurring debate over the AI bubble has flared up again, leading to divided opinions among experts.

Microsoft's earnings announcement has hit the New York Stock Exchange hard, reigniting the artificial intelligence (AI) bubble theory. Photo by Getty Images

Microsoft, often seen as a bellwether for big tech, saw its stock price plunge 10% during the previous session, closing at $433.50. This shock to the market is attributed to a slowdown in the growth rate of its cloud services division, which is a key growth driver. Microsoft has been making large-scale investments in AI infrastructure and data center expansion, but mounting concerns that rising costs could translate into a tangible decline in profits have negatively impacted its stock price. In just one day, its market capitalization dropped to $3.222 trillion.

Excessive reliance on OpenAI is also cited as a negative factor for Microsoft's stock. Nearly 45% of Microsoft's $625 billion in remaining future cloud contracts are related to OpenAI, raising concerns about the company's heavy dependence on a single partner. With the growth rate of Microsoft's core cloud services division slowing in the fourth quarter and its first-quarter operating margin forecast revised downward, the bubble theory-which had briefly subsided-has resurfaced. Persistent worries about excessive AI infrastructure investment by big tech companies and continued investor sell-offs have also led to declines in the stock prices of other software giants such as Oracle, Palantir, and Salesforce.

Demis Hassabis, CEO of Google DeepMind

Views among industry gurus on the AI bubble theory are also divided. At the recent World Economic Forum (WEF) in Davos, Switzerland, Demis Hassabis, CEO of Google DeepMind, drew attention by raising concerns about the AI bubble. While Jensen Huang, CEO of Nvidia, dismissed the bubble theory during a conversation with Larry Fink, CEO of BlackRock, at the WEF-saying that the bubble is due to the sheer scale of investment required to build AI infrastructure across five layers-Hassabis issued a warning about the bubble.

In an interview with the Financial Times (FT), CEO Hassabis stated, "Some AI investments are increasingly starting to look like a bubble," adding, "It seems unsustainable for brand-new startups with no products or technology to be raising billions of dollars in early-stage funding. There could be a correction in parts of the market."

However, he mentioned that even if the bubble bursts, Google could avoid the risks. CEO Hassabis asserted, "Demand for Google AI products like the Gemini 3 model is stronger than ever," and added, "If the bubble bursts, we will be fine. We have tremendous businesses where we can add AI capabilities and further boost productivity."

The consensus in the industry is that the debate over the AI bubble will continue throughout this year, as it did last year. Stock prices of cloud-related companies have soared amid the AI boom, and massive investments have poured in, but the lack of corresponding performance and profitability has created a disconnect. An IT industry insider commented, "While investors' attention is focused on AI companies, the controversy continues because it has not yet translated into substantial profits," and predicted, "As more companies achieve monetization this year, it will be a year in which the wheat is separated from the chaff among AI companies."