'Working People Will Pay a High Price': Report Warns AI Bubble Is 'Primed to Pop'
"Policymakers need to act now to shore up the financial system and make clear that taxpayers will not be forced to bail out the companies and financiers responsible."
A report released on Wednesday warns that the investment boom in artificial intelligence is a financial bubble that is "primed to pop" and harm working-class Americans if lawmakers don't take concrete steps to shield them from the damage.
The report, produced by Open Markets Institute and Americans for Financial Reform Education Fund, warns that Big Tech companies are using increasingly risky debt-fueled financing methods to keep plowing money into AI infrastructure, which has resulted in global stock markets growing overvalued to "a historic degree."
The report highlights the role played by so-called circular financing agreements, in which one company agrees to fund another company’s AI project in exchange for the firm receiving the money buying the investing firm’s products.
"The AI industry’s extensive ecosystem of circular financing and purchase agreements makes it very hard for outsiders to determine how much bona fide revenue the technology is generating," the report notes, "and very easy for companies to artificially inflate the revenues and deflate the expenses they release to the public."
While such financing deals aren't inherently unlawful, the report continues, they can "be used to create a false impression of strong demand and disguise the true state of the involved companies’ finances, particularly when circular arrangements drive a substantial portion of the companies’ revenues."
The report also urges lawmakers to avoid the same mistakes the federal government made during the presidencies of George W. Bush and Barack Obama, when it bailed out financial institutions in the wake of the 2008 housing crash.
"If they face collapse, neither AI-related firms nor their leadership should be shielded from the financial or legal consequences of their mismanagement," the report states. "Under no circumstances should failing AI-related firms receive government support to remain going concerns. Instead, failed AI firms should be moved through legal proceedings for liquidating and/or dissolving firms in an orderly manner."
Instead of saving the AI firms and their financiers, the report emphasizes lawmakers "must prioritize the recovery and protection of workers and families by directing federal assistance to workers, households, and communities harmed by the crisis."
Maya Jenkins, senior policy analyst at Americans for Financial Reform Education Fund and co-author of the report, accused President Donald Trump and his administration of making the AI bubble more dangerous by "rolling back guardrails that protect investors and financial stability."
"If nothing changes, working people will pay a high price for an AI crash," Jenkins emphasized. "Policymakers should be taking urgent action to reduce the risks. And they should be committing now to not bail out the AI companies or banks and financial firms that caused the problems."
Matthew Scherer, fellow at Open Markets Institute and report co-author, similarly emphasized the AI bubble's potential cost to working-class Americans and urged lawmakers to take a proactive approach to mitigating harms.
"Workers could lose their jobs, families could see their retirement savings evaporate, and communities could face the fallout from another financial crisis. Policymakers need to act now to shore up the financial system and make clear that taxpayers will not be forced to bail out the companies and financiers responsible."
The AI bubble report came one day after Reuters reported that frontier AI lab Anthropic recorded a net loss of $80 billion in the first half of 2026, more than six times the $13 billion loss the company posted a year earlier.
Despite bleeding money, the company is seeking an initial public offering next month worth $1.5 trillion, according to Reuters.
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A report released on Wednesday warns that the investment boom in artificial intelligence is a financial bubble that is "primed to pop" and harm working-class Americans if lawmakers don't take concrete steps to shield them from the damage.
The report, produced by Open Markets Institute and Americans for Financial Reform Education Fund, warns that Big Tech companies are using increasingly risky debt-fueled financing methods to keep plowing money into AI infrastructure, which has resulted in global stock markets growing overvalued to "a historic degree."
The report highlights the role played by so-called circular financing agreements, in which one company agrees to fund another company’s AI project in exchange for the firm receiving the money buying the investing firm’s products.
"The AI industry’s extensive ecosystem of circular financing and purchase agreements makes it very hard for outsiders to determine how much bona fide revenue the technology is generating," the report notes, "and very easy for companies to artificially inflate the revenues and deflate the expenses they release to the public."
While such financing deals aren't inherently unlawful, the report continues, they can "be used to create a false impression of strong demand and disguise the true state of the involved companies’ finances, particularly when circular arrangements drive a substantial portion of the companies’ revenues."
The report also urges lawmakers to avoid the same mistakes the federal government made during the presidencies of George W. Bush and Barack Obama, when it bailed out financial institutions in the wake of the 2008 housing crash.
"If they face collapse, neither AI-related firms nor their leadership should be shielded from the financial or legal consequences of their mismanagement," the report states. "Under no circumstances should failing AI-related firms receive government support to remain going concerns. Instead, failed AI firms should be moved through legal proceedings for liquidating and/or dissolving firms in an orderly manner."
Instead of saving the AI firms and their financiers, the report emphasizes lawmakers "must prioritize the recovery and protection of workers and families by directing federal assistance to workers, households, and communities harmed by the crisis."
Maya Jenkins, senior policy analyst at Americans for Financial Reform Education Fund and co-author of the report, accused President Donald Trump and his administration of making the AI bubble more dangerous by "rolling back guardrails that protect investors and financial stability."
"If nothing changes, working people will pay a high price for an AI crash," Jenkins emphasized. "Policymakers should be taking urgent action to reduce the risks. And they should be committing now to not bail out the AI companies or banks and financial firms that caused the problems."
Matthew Scherer, fellow at Open Markets Institute and report co-author, similarly emphasized the AI bubble's potential cost to working-class Americans and urged lawmakers to take a proactive approach to mitigating harms.
"Workers could lose their jobs, families could see their retirement savings evaporate, and communities could face the fallout from another financial crisis. Policymakers need to act now to shore up the financial system and make clear that taxpayers will not be forced to bail out the companies and financiers responsible."
The AI bubble report came one day after Reuters reported that frontier AI lab Anthropic recorded a net loss of $80 billion in the first half of 2026, more than six times the $13 billion loss the company posted a year earlier.
Despite bleeding money, the company is seeking an initial public offering next month worth $1.5 trillion, according to Reuters.
- When the AI Bubble Bursts, Working Families Will Pay the Price ›
- Warnings of AI Bubble Grow Louder as Big Investors Dump Nvidia Stock ›
- Warning Against Taxpayer Bailout for Big Tech, Critics Fume Over OpenAI Execs' Talk of Government Loans ›
- Ocasio-Cortez Says ‘We Should Not Be Entertaining a Bailout’ of AI Industry as Bubble Fears Grow ›
A report released on Wednesday warns that the investment boom in artificial intelligence is a financial bubble that is "primed to pop" and harm working-class Americans if lawmakers don't take concrete steps to shield them from the damage.
The report, produced by Open Markets Institute and Americans for Financial Reform Education Fund, warns that Big Tech companies are using increasingly risky debt-fueled financing methods to keep plowing money into AI infrastructure, which has resulted in global stock markets growing overvalued to "a historic degree."
The report highlights the role played by so-called circular financing agreements, in which one company agrees to fund another company’s AI project in exchange for the firm receiving the money buying the investing firm’s products.
"The AI industry’s extensive ecosystem of circular financing and purchase agreements makes it very hard for outsiders to determine how much bona fide revenue the technology is generating," the report notes, "and very easy for companies to artificially inflate the revenues and deflate the expenses they release to the public."
While such financing deals aren't inherently unlawful, the report continues, they can "be used to create a false impression of strong demand and disguise the true state of the involved companies’ finances, particularly when circular arrangements drive a substantial portion of the companies’ revenues."
The report also urges lawmakers to avoid the same mistakes the federal government made during the presidencies of George W. Bush and Barack Obama, when it bailed out financial institutions in the wake of the 2008 housing crash.
"If they face collapse, neither AI-related firms nor their leadership should be shielded from the financial or legal consequences of their mismanagement," the report states. "Under no circumstances should failing AI-related firms receive government support to remain going concerns. Instead, failed AI firms should be moved through legal proceedings for liquidating and/or dissolving firms in an orderly manner."
Instead of saving the AI firms and their financiers, the report emphasizes lawmakers "must prioritize the recovery and protection of workers and families by directing federal assistance to workers, households, and communities harmed by the crisis."
Maya Jenkins, senior policy analyst at Americans for Financial Reform Education Fund and co-author of the report, accused President Donald Trump and his administration of making the AI bubble more dangerous by "rolling back guardrails that protect investors and financial stability."
"If nothing changes, working people will pay a high price for an AI crash," Jenkins emphasized. "Policymakers should be taking urgent action to reduce the risks. And they should be committing now to not bail out the AI companies or banks and financial firms that caused the problems."
Matthew Scherer, fellow at Open Markets Institute and report co-author, similarly emphasized the AI bubble's potential cost to working-class Americans and urged lawmakers to take a proactive approach to mitigating harms.
"Workers could lose their jobs, families could see their retirement savings evaporate, and communities could face the fallout from another financial crisis. Policymakers need to act now to shore up the financial system and make clear that taxpayers will not be forced to bail out the companies and financiers responsible."
The AI bubble report came one day after Reuters reported that frontier AI lab Anthropic recorded a net loss of $80 billion in the first half of 2026, more than six times the $13 billion loss the company posted a year earlier.
Despite bleeding money, the company is seeking an initial public offering next month worth $1.5 trillion, according to Reuters.
- When the AI Bubble Bursts, Working Families Will Pay the Price ›
- Warnings of AI Bubble Grow Louder as Big Investors Dump Nvidia Stock ›
- Warning Against Taxpayer Bailout for Big Tech, Critics Fume Over OpenAI Execs' Talk of Government Loans ›
- Ocasio-Cortez Says ‘We Should Not Be Entertaining a Bailout’ of AI Industry as Bubble Fears Grow ›