In the weeks leading up to the U.S. midterm elections, concerns about the rapid expansion and economic impact of artificial intelligence have intensified, sparking debate among policymakers and economists about the potential risks facing the economy. Amid growing unease, President Donald Trump has maintained a focus on advancing AI development as a key component of national prosperity, rejecting calls to implement international regulatory agreements.

In September, a whistleblower warning about AI’s existential threats gained significant public attention, catching the White House unprepared. Despite this, Trump dismissed such fears and declined to pursue cooperative measures with China to establish guardrails for AI development during a high-profile summit in Washington. Privately, the president expressed concern that widespread public anxiety could destabilize markets heavily invested in AI-related sectors. Campaigning ahead of the elections, Trump has pledged to foster a “golden age” of economic growth centered on technology advancements.

However, several leading economists and financiers have raised alarms about an emerging AI-driven market bubble. Prominent figures like Ray Dalio, founder of Bridgewater Associates, and hedge fund manager Ken Griffin have characterized AI stocks as significantly overvalued, buoyed by enthusiasm rather than underlying financial fundamentals. Harvard economist Kenneth Rogoff warned that fiscal policies under Trump’s administration could limit the government’s ability to respond effectively to a potential financial crisis, possibly triggering a severe market correction and recession given the economy’s heavy reliance on AI sectors.

Spending on data center infrastructure—crucial to AI operations—accounted for nearly all U.S. economic growth earlier this year, independent analyses indicate. Without this investment, economic expansion would have slowed dramatically, raising concerns over sustainability. The Nasdaq 100, concentrated with around 70% weight in AI-dependent firms including semiconductor manufacturers and major technology companies, underscores the market’s vulnerability. High-profile AI enterprises like Anthropic and OpenAI plan public offerings in the near future, highlighting continued investor interest despite the growing risks.

Experts also point to broader economic challenges affecting the AI industry. Tariffs have increased costs for imported chips and hardware, while visa restrictions have limited access to global talent pools. Rising national debt and elevated long-term bond yields heighten financial pressure on companies already carrying significant debt loads. Servaas Storm, an AI sector analyst at Delft University of Technology, noted that early adopters such as Microsoft and Meta are curbing AI usage due to operational difficulties, including quality control and security issues, which could further hinder revenue growth and profitability. Storm predicts that the AI bubble may burst before the end of Trump’s term, driven by rising debt and interest rates.

Financial stress is compounded by durable inflation, now at 3.7%, after previously declining during the Biden administration, with persistent increases in energy, transportation, and housing costs. This has prompted the Federal Reserve to maintain high interest rates, intensifying financial burdens for borrowers and pressuring bond markets. Treasury yields on 10-year notes have reached levels unseen since the early 2000s, reflecting investor concerns about government debt sustainability.

Public sentiment reflects these economic uncertainties, with polls showing widespread pessimism about the economy and low approval ratings for Trump’s economic management, including notable disapproval within his own party. Some top AI companies reportedly conduct “day-after” crisis simulations, anticipating a potential AI-related financial disturbance within the coming year.

While Trump champions AI as a driver of future prosperity, economists and financiers caution that the rapid, debt-fueled expansion within the sector may heighten the risk of a sharp market downturn, potentially exposing vulnerabilities in broader U.S. economic policy and financial stability.