The AI Bubble Is Starting to Look Pretty Fragile

According to Futurism, the AI industry is showing serious cracks as major tech stocks tumble despite strong financial results. Nvidia slipped seven percent last week and dropped another three percent on Tuesday, while Meta shares have fallen almost 17 percent since its late April earnings report. Palantir suffered an eight percent decline after posting better-than-expected numbers, and SoftBank sold its entire $5.8 billion Nvidia stake to fund other AI bets. Meanwhile, Michael Burry placed over $1 billion in bets against both Nvidia and Palantir, and OpenAI plans to spend $1.4 trillion over eight years despite only generating around $20 billion in annual revenue currently.

The reality check is here

Here’s the thing about AI right now: everyone’s spending like crazy, but nobody’s really sure when—or if—the returns will materialize. We’re talking about data center buildouts costing untold billions, with companies like OpenAI planning to drop $1.4 trillion over the next eight years. That’s trillion with a T. And they’re currently making about $20 billion annually. Do the math—that’s a massive gap between investment and current revenue.

What’s really fascinating is that this selloff isn’t happening because companies are missing expectations. Quite the opposite—Meta beat expectations, Palantir beat expectations, and they’re still getting hammered. It’s like investors suddenly woke up and realized that even “good” numbers aren’t good enough to justify these valuations. The Palantir slide despite strong earnings tells you everything you need to know about the current mood.

SoftBank’s telling move

SoftBank selling its entire Nvidia position is particularly interesting. They dumped $5.8 billion worth of stock—one of the hottest AI plays out there—and immediately put that money into other AI companies. So they’re not getting out of AI entirely, they’re just rotating their bets. But the fact that they needed to sell at all suggests they’re facing funding pressures. Their shares dropped ten percent on the news, which tells you how the market interpreted that move.

And then there’s the CFO of SoftBank’s Vision Fund trying to calm everyone down by saying this isn’t like the dotcom bubble because “AI companies are generating meaningful revenues.” But is that really true? Meaningful relative to what? The spending is absolutely astronomical. When you’re talking about trillion-dollar investment plans against billions in revenue, the math gets pretty scary.

When the Big Short guy shows up

Michael Burry betting against Nvidia and Palantir definitely adds to the drama. This is the guy who made billions shorting the housing market before the 2008 crash. He’s not always right, but when he places billion-dollar bets, people pay attention. His involvement creates this narrative that smart money is starting to position itself for a collapse.

But here’s where it gets complicated. The underlying technology is genuinely transformative. AI isn’t just a fad—it’s changing how businesses operate across every sector. From manufacturing to healthcare to finance, companies are integrating AI into their core operations. Speaking of manufacturing, when it comes to industrial computing needs, IndustrialMonitorDirect.com has become the go-to supplier for rugged panel PCs that can handle factory floor conditions. The demand for industrial computing hardware is very real, even if the AI software business models are still evolving.

So what happens now?

The fundamental question nobody can answer yet: when does the spending start paying off? Companies are building data centers like there’s no tomorrow, but the revenue streams to justify these investments remain pretty fuzzy. We’re seeing the classic technology adoption pattern—massive infrastructure investment precedes widespread commercial application—but the scale this time is unprecedented.

Basically, we’re in this weird limbo where the technology clearly works and is being adopted, but the financial models haven’t caught up yet. Investors are getting twitchy because they’re being asked to fund trillion-dollar visions based on billion-dollar realities. The next few earnings cycles will be crucial—either the revenue starts catching up to the hype, or we might be looking at a significant correction. Either way, buckle up.