“The canal mania of the 1830s. The British railway bubble of the 1840s. The dot-com crash of 2000. Each began with a genuine technological breakthrough that attracted more capital than commercial returns could ultimately justify. Each ended in a recession…
What makes an AI bust particularly dangerous, the BIS argues, isn’t just the scale of the spending — it’s how it’s financed.
Hyperscalers, chipmakers, and AI labs are linked through what the report calls ‘a complex web of private arrangements.’ The most prominent is circular financing: hyperscalers take equity stakes in AI labs, which in turn commit to multi-year purchases of chips or computing power from those same hyperscalers. Data centers are outsourced to third-party contractors that lease the facilities back under long-dated contracts with embedded exit clauses.”