Recent fluctuations in technology stocks have reignited concerns over a potential bubble in artificial intelligence (AI) investments, with some experts warning that a collapse could have widespread economic consequences. Finance professor Itay Goldstein of the University of Pennsylvania’s Wharton School highlighted signs of overvaluation within the sector, noting that the five largest tech companies on Wall Street collectively hold a market value near $18 trillion—comparable to the size of China’s economy.

Over the past several months, these technology giants have shifted from buying back their own shares—a common practice signaling excess cash and supporting stock prices—to increasing their borrowing to finance AI development efforts. Brent Fredberg, director of investments at Brandes Investment Partners, stated that while the current debt levels remain relatively modest, potential interest rate hikes hinted at by the U.S. Federal Reserve could significantly increase borrowing costs.

Adding to market unease, SpaceX, which recently completed a high-profile initial public offering (IPO), announced plans to issue $25 billion in bonds. This move raised questions about the company’s financial stability and contributed to a drop in its share price. Analysts have also highlighted risks associated with circular financing, whereby large tech firms invest heavily in AI startups that in turn purchase products and services from those same companies—a dynamic that some warn could resemble a fragile house of cards.

This week’s downturn in tech stocks has revivified concerns about a broader AI-driven market correction. Oracle experienced its steepest weekly decline since the early 2000s dot-com crash, falling 19% over five days—a drop comparable to its 20% fall in August 2001. Fredberg described the market environment as “very skittish.”

Despite these cautionary views, not all market observers agree that the recent volatility signals a fundamental collapse. Christian Stocker, a UniCredit director, characterized recent price movements as a natural response to profit-taking, valuation assessments, and shifts in investment flows amid rising interest rates, rather than evidence of an underlying market break.

Should an AI bubble burst, experts warn the impact could be historic, given the dominance of the largest tech companies in global financial markets. Goldstein pointed out that unlike the dot-com crash over 25 years ago—which primarily affected smaller firms—a major downturn today would directly affect some of the world’s most valuable corporations. Fredberg noted that while current speculation is less extreme than the late 1990s tech frenzy, a severe market correction could still have significant ripple effects across the broader economy. With a large portion of the U.S. population holding stocks directly or through retirement plans like 401(k)s, a major tech selloff could undermine financial security for millions of Americans.