On the surface, the American economy appears to be roaring, driven by a seemingly unstoppable boom in artificial intelligence. Tech giants are investing hundreds of billions of dollars, stock prices are soaring, and headlines proclaim a new era of technological prosperity. But beneath this glittering facade lies a dangerous illusion: a trillion-dollar shell game where a handful of mega-corporations are passing money back and forth, creating the appearance of growth while the real economy stagnates.
This is not a story of genuine innovation, but of sophisticated financial engineering. The mechanics are simple: a tech giant like Microsoft invests billions into an AI startup like OpenAI. OpenAI, in turn, uses that money to pay for cloud computing services from... Microsoft Azure.
Similarly, Amazon invests billions in Anthropic, which then spends that money on Amazon Web Services (AWS). It's a closed loop, a circular flow of capital that inflates revenues and creates a mirage of economic activity.
The money never leaves the ecosystem; it just gets counted multiple times, boosting the balance sheets of the Big Tech players and fueling a speculative frenzy in their stocks.
This circular spending has a powerful distorting effect on the broader economy.
In 2025 alone, Big Tech is on track to spend nearly $400 billion on AI, with this capital spending accounting for an estimated half of all U.S. GDP growth.
This creates the illusion of a robust economy, but it is a growth built on sand. It is not the result of new products being sold, new factories being built, or new jobs being created in the real economy. It is the result of a handful of tech companies shuffling money between their own pockets.
The parallels to the dot-com bubble of the late 1990s are undeniable. Then, as now, a new technology was hailed as a world-changing paradigm, and speculative mania drove valuations to absurd heights. Companies with no profits and no viable business models were worth billions, based on the promise of a future that never quite materialized. The AI bubble is following the same script, but with a dangerous new twist: the circular funding model allows the bubble to inflate to an even greater size, creating an even greater systemic risk.
While the AI bubble enriches a small cadre of tech executives and shareholders, the real economy is in shambles. Inflation remains stubbornly high, wages are stagnant, and millions of Americans are struggling to make ends meet.
The AI boom is not lifting all boats; it is a private party for the ultra-wealthy, a spectacle of financial engineering that masks the underlying decay of the American middle class.
This is the inevitable endgame of shareholder primacy: a system that prioritizes short-term stock price manipulation over long-term value creation. The AI bubble is not a sign of economic health; it is a symptom of a deep-seated disease. It is a warning that our economy is no longer based on the production of real goods and services, but on the creation of speculative bubbles and financial illusions. The question is not if this bubble will burst, but when—and what will be left of the real economy when it does.
What do you think? Is the AI boom a genuine technological revolution, or a dangerous speculative bubble?
How can we build an economy based on real value creation, not financial engineering? Share your thoughts in the comments below.