Andrew Ross Sorkin on What 1929 Teaches Us About 2025

"When President Donald Trump began his tariff rollout, the business world predicted that his unprecedented attempt to reshape the economy would lead to a major recession, if he went through with it all. But the markets stabilized and, in recent months, have continued to surge. That has some people worried about an even bigger threat: that overinvestment in artificial intelligence is creating a bubble."

"He tells David Remnick that the concern lies in the immense borrowing to build the infrastructure for a future A.I. economy, without the sufficient revenue, currently, to pay off the loans. "If I learned anything from covering 1929, [and] covering 2008, it is leverage," Sorkin says, "people borrowing to make all of this happen. And right now we are beginning to see a remarkable period of borrowing to make the economics of A.I. work.""

Tariff-driven recession fears did not materialize as markets stabilized and later surged. Rising market strength has prompted concerns that overinvestment in artificial intelligence could create a bubble. Large-scale borrowing is financing the buildout of AI infrastructure while current revenue streams remain insufficient to repay those loans. Historical patterns of excessive leverage in 1929 and 2008 serve as cautionary comparisons for the present surge of borrowing. The reliance on debt to make AI economics work increases systemic financial risk if anticipated profits fail to materialize.

Read at The New Yorker