Where Do You Hide From an AI Bubble? | Merryn Talks Money

The massive $1 trillion annual investment in AI infrastructure faces a sustainability crisis, as generating reasonable returns would require users to spend nearly 15% of US GDP by 2030. This capital-intensive model is already showing signs of strain, with rising credit costs pressuring "neocloud" providers and established firms. A potential collapse in this AI-driven earnings bubble threatens to trigger a severe recession, particularly given the US economy's reliance on equity wealth and low savings rates. Meanwhile, structural inflationary pressures—fueled by energy shocks, de-globalization, and non-productive defense spending—remain a primary concern. Consequently, investment strategies are shifting away from long-duration bonds and equities toward inflation-linked securities, reflecting a cautious stance that prioritizes capital preservation over speculative growth in an increasingly uncertain fiscal environment.