Is the flood of investment in AI a bubble? Even industry leaders seem to begin to worry about the possibility of overzealous investor expectations while simultaneously downplaying them. Sam Altman, CEO of OpenAI, remarked that “there will be booms and busts,” and they expect cases of capital misallocation that lose money. Brett Taylor, a board member of OpenAI, agreed with Altman that we’re “in a bubble, and a lot of people will lose a lot of money,” but that “huge amounts of economic value” will be generated in the future.
AI is currently in an unprecedented boom, and there seems to be little sign of slowing down: AI related investment accounted for around 18 percent of U.S. GDP growth in the second quarter, and according to an analysis by J.P. Morgan “AI related stocks have accounted for 75% percent of S&P 500 returns, 80% percent of earnings growth and 90% percent of capital spending growth since ChatGPT launched in November 2022.” The American economy is functionally propped up by investor confidence in the AI industry, and what’s driving this confidence is the tantalizing possibility of an artificial general intelligence (AGI). The explicitly stated goal of OpenAI is the creation of AGI, a “highly autonomous systems that outperform humans at most economically valuable work,” leading to massive gains in economic productivity. Altman hinted at a timeline throughout the 2030’s. If one is convinced that an AGI as promised is right around the corner, then hundreds of billions of dollars is chump change compared to what one could reap. However, the marked shift of AI companies towards the “slop economy” casts doubt on their internal confidence in the profitability of AGI expectations.
Altman recently announced that they would be reducing the guardrails on content ChatGPT can produce and ultimately permit “erotica for verified adults.” A few weeks before, Altman promoted Pulse, his “favorite feature of ChatGPT, so far,” which provides a daily list of recommendations based on data gathered from a user’s chats. Several days later, OpenAI launched Sora, a dedicated app for AI video generation with a vertical scrolling feed for AI short-form videos akin to TikTok, just as Mark Zuckerberg’s Meta added a similar feature. If this is what companies are dedicating their resources towards, then these are not the actions of a serious industry but pivots of one that is seeking alternative revenue streams through loosening their morals to unleash the most anti-social uses of generative AI. This content has rightfully been labeled as “slop,” but unfortunately, the internet happens to be a pigsty where it is not just popular but profitable for those who create it. The leaders of the industry are just finally willing to lower themselves to roll around in it.
There are several reasons why the industry is making this pivot. First, the mass buildout of AI infrastructure, such as data centers, needs justification. OpenAI has pledged a total of over one trillion dollars of spending over the next five years to companies such as “Oracle, Nvidia, AMD, and Broadcom,” and is working to accrue the capital to do so, much of it being supplied via pledges from other AI companies. This incestuous knot is being backed not by cash but by large amounts of debt. Second, the industry is simply not profitable. According to calculations by investors Azeem Azhar, former business correspondent for the Economist, and Nathan Warren, senior researcher at Azhar’s publication Exponential View, 400 billion has been spent alone on data centers in 2025, while revenue for the AI industry in the same year is projected at 60 billion. According to a source from the Financial Times, OpenAI is operating on an eight billion dollar loss for the first half of the year and throwing around promises of returns worth hundreds of billions. Here lies the danger: OpenAI has set the bar for success so high that even if they do produce useful technology with just modest productivity gains, it will be catastrophic. It’s undeniable that AI has productive uses and can be in the service of humanity, after all, it just contributed to winning a Nobel Prize, but what the weavers promised to the emperor wasn’t just a beautiful garment but something magical and invisible to the unworthy.
What’s being promised is that AGI will justify the trillion dollars thrown into it and make even more for everyone involved, so when the leaders of the industry start throwing away their dignity, it’s time to wonder whether they believe in the magic themselves or if they are simply convincing everyone that generated clothes are enough.
The Zeitgeist aims to publish ideas worth discussing. The views presented are solely those of the writer and do not necessarily reflect the views of the editorial board.
