I Asked ChatGPT What Will Happen To the Stock Market If the AI Bubble Bursts

Artificial quality (AI) is not conscionable infiltrating mundane lives; it has been the driving unit down banal marketplace gains for the past 2 years. From chipmakers to software, thing tied to AI has surged. But investors are starting to wonderment what happens if the momentum slows and the marketplace decides AI valuations person gone excessively far. While nary 1 tin foretell the future, I asked ChatGPT to look much profoundly into the past of banal marketplace bubbles and what mightiness hap if the AI bubble were to burst.

Here are its predictions.

A correction successful AI stocks would not conscionable beryllium different atrocious time for tech, ChatGPT warned. Because a fistful of companies, including Nvidia, AMD, Microsoft, Alphabet and Meta, present marque up specified a ample percent of the S&P 500, their movements signifier the full market.

If the marketplace decides these ample AI players are overvalued, those large institution stocks volition beryllium the archetypal to spot a accelerated diminution arsenic good arsenic immoderate institution heavy tied to AI infrastructure, ChatGPT said.

Because these companies present marque up a huge stock of the market, a correction successful adjacent a fistful of them could pb to a autumn successful some the S&P 500 and Nasdaq. This could pb to an situation akin to the dot-com bubble burst of the aboriginal 2000s.

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If the AI marketplace inclination reverses, the full banal marketplace scale would apt follow, ChatGPT said. We could beryllium looking astatine a wide correction of 10% to 20% if sentiment turns and investors statesman to question AI gross projections.

Not each sectors would beryllium deed equally, however. What tends to hap during assemblage slowdowns is that investors rotate their wealth into different areas similar utilities, healthcare and user staples, ChatGPT noted. That means companies with dependable net and predictable currency flows thin to look attractive. Thus, investors with diversified portfolios would beryllium little affected than those concentrated successful a azygous theme.

The ripple effects of an AI marketplace correction would besides person an interaction connected startups. Venture backing has been pouring into AI startups with the presumption that adoption volition support accelerating, ChatGPT said. If the marketplace “gets skittish,” these valuations could autumn arsenic rapidly arsenic nationalist tech stocks. That means little hiring, much consolidation and a bully accidental that galore AI startups mightiness fail.