S&P Global Warns of AI Bubble in US-China Race

S&P Global Ratings warned that the artificial intelligence race between the United States and China faces significant financial risks over the next three years, including the possibility of an AI bubble burst and mass layoffs. The agency describes a clash between two distinct strategies: a market-driven model in the United States and a state-led model in China.

While the United States benefits from superior cutting-edge technology and larger investments, it faces constraints regarding the return on investment for data centers. Conversely, China excels in national coordination and power availability but risks excessive infrastructure development. S&P Global notes that U.S. semiconductor restrictions are challenging China while simultaneously accelerating the development of China's domestic chip supply chains.

A financial downturn in the AI sector could trigger broader global market instability. The report identifies export-driven economies, specifically South Korea and Taiwan, as being at higher risk. Additionally, data-center hubs such as Malaysia and Australia could face significant economic impacts if the current investment trajectory fails.