Is the AI boom heading towards a bust – just like many other boom and bust developments of the past?

Four researchers at MIT NANDA have published a report – The State of AI in business 2025 – which raises some interesting facts.

They said: “Despite $30-40 billion in enterprise investments in GenAI, this report uncovers a surprising result in that 95% of organisations are getting zero return.”

“Tools like ChatGPT and Copilot Are widely adopted. Over 80% of organisations have exploited or piloted them and nearly 40% reported employment. But these tools primarily enhance individual productivity not P&L performance. Just 5% of integrated AI pilots are extracting millions in value while the majority remain stuck with no measurable P&L impact,” the report said.

The authors suggest there are four patterns emerging from the Gen AI Divide: Only two in eight major sectors show meaningful structural change; big firms lead in pilot volume but lag in scale up; budgets favour visible top line functions over high ROI back office; external partnerships see twice the success rate of internal builds. The last suggests consultants are doing well and better than the companies they advise.

Despite all the hype the report finds that: “The core barrier to scaling is not infrastructure, regulation or talent. It is learning. Most GenAI systems do not retain feedback, adapt to context, or improve over time.”

They say that despite high-profile investment, industry-level transformation remains limited and that only two industries – Tech and Media show clear signs of structural disruption.

They conclude: “The GenAI Divide is not permanent, but crossing it requires fundamentally different choices about technology, partnerships and organisational design.”

The Economist (13/9) in a special feature which drew on the report in part said: “Since the release of ChatGPT in 20223 the value of America’s stock market has risen by $21 trillion. Just 10 firms including Amazon, Viacom and Nvidia – account for 55% of the ride. All are riding high on enthusiasm for artificial intelligence. The market is so hot because many believe AI will transform the economy.”

But not so fast apparently. The Economist cites the bank UBS report that revenues to date have ‘been disappointing’. It also estimates that total revenue for the leading AI firms is $50 billion a year – only two per cent of the $2.9billion investments in new data centres globally.

Praetorian Capital (a hedge fund) drew a parallel with the massive investment in fibre during the dot-com boom which never achieved a return. It is telling that current AI share prices are in similar stratosphere as dot com prices.

Back in 2008 The Federal Reserve Bank of San Francisco published a study which found that: “History tells us that periods of major technological innovation are often accompanied by speculative bubbles as investors overreach to genuine advances in productivity.

The Economist also cited an academic study from 2018 which looked at 51 innovations between 1825 and 2009 which found that 37 were associated with bubbles.

From British railways in the 1860s Japanese property and electronics booms to US railways individual investors lost big sums while companies – such as British and UK railways – went bust.

Drawing on sources from histories and Census and OECD data The Economist listed the booms and busts and their impacts on capital expenditure as % of GDP, asset durability and systemic links to the rest of the economy.

It included the 1840s British railways which was sparked by technological changes; the 1860 railway bust in Britian related to political shifts; 1880s US electric light; US electricity/radio; US electronics 1960s; consumer tech Japan 1980s, dotcom US/ Europe (and much of the rest of the world 1960s and 2022 AI global.

In terms of US capital expenditure by large tech firms and start ups UBS data cited by the Economist found it to be about at $20 billion in 2017. It skyrocketed to just under $400 billion by 2025 and is estimated to hit $500 billion by 2027.

AI may well transform very many things – from student essay writing to AI help in detecting student plagiarism to health care.

But you don’t need to be a committed Luddite to ask questions about what it will actually achieve, what problems may arise, when or how the boom will bust, and what the aftermath might bring

We might not all rooned but lots of investors might find themselves bemoaning the aftermath of yet another in the centuries old history of investors getting burned.

Back in the winter of 1928 Joe Kennedy, father of JFK and major stock market player, stopped to get his shoes shined. The shoeshine boy leaned in and said, “Buy Hindenburg”. Kennedy began unwinding his positions saying, “You know it’s time to sell when shoeshine boys give you stock tips. This bull market is over.”

What the latter day version of this will only be known after it all happens.