How Much Would an AI Crash Destroy?

The current AI-driven market boom has concentrated global equity returns into a narrow set of tech-adjacent companies, creating significant downside risk for ordinary investors. While AI represents a transformative technological shift, history—from the 1840s railway mania to the dot-com bubble—shows that even revolutionary innovations can lead to massive wealth destruction when valuations become detached from reality. Beyond headline capital spending, billions in off-balance-sheet purchase commitments and a creaking private credit market further exacerbate potential instability. True portfolio protection requires genuine diversification into non-correlated assets, such as stable dividend-paying firms, rather than relying on a collection of tech stocks that tend to collapse simultaneously. Investors must distinguish between the long-term utility of a technology and the immediate viability of its current market pricing to avoid being wiped out by the inevitable correction of speculative bubbles.