Treasury Draft Report Warns of Systemic AI Market Bubble

Career analysts at the United States Department of the Treasury authored a draft report warning that the artificial intelligence market is forming a bubble that could pose systemic risks to the U.S. economy. The report compares the current environment to the dotcom era but notes that AI firms are more deeply entrenched in the economy, meaning a downturn would send shockwaves through stock markets, chip manufacturers, utilities, and private credit markets.

The analysts identified several risk factors, including geopolitical tensions, electricity bottlenecks, and a heavy reliance on institutional investors. While the report acknowledges that AI companies currently possess healthier balance sheets and more profitability than the ventures of the late 1990s, it concludes that financial stability now depends heavily on these companies meeting productivity expectations.

The findings contradict the public stance of the administration, which views AI as a driver of a Golden Age. A Treasury spokesperson dismissed the draft as unvetted and not representative of official policy. Treasury Secretary Scott Bessent has previously argued that the primary risk to the industry is China surpassing U.S. capabilities, while Senator Elizabeth Warren has proposed legislation to require AI companies to disclose their debt.