Bloomberg Simulates AI Bubble Burst: Global GDP Could Lose $1.6 Trillion

Since the launch of ChatGPT in 2022, the breakthrough advancements in artificial intelligence (AI) technology have sparked the imagination of global investors and driven the market capitalization of the 'Big Seven Tech' companies to swell by several trillion dollars.

However, a recent report released by Bloomberg Economics Research indicates that while the potential of AI is enormous, the pace of profit realization may not be able to keep up with the extremely high expectations of the market. If market confidence suddenly collapses, it could trigger global economic turmoil.

Global GDP Could Lose $1.6 Trillion

To measure potential risks, Bloomberg's global modeling team used the SHOK model to simulate a specific scenario: assuming the S&P 500 index falls by 20% (about half the decline during the internet bubble burst), accompanied by increased uncertainty, widened credit spreads, and stalled data center construction investment.

According to the model's calculations, such an impact would result in a loss of approximately $1.6 trillion in global GDP in the first year of the bubble's collapse.

For the United States, the combined effect of stock market sell-offs and the collapse of capital expenditure (Capex) could push the economy to the brink of recession. Research shows that if the collapse occurs in early 2026, the U.S. GDP growth rate in 2027 could plummet by 1.5 percentage points, even leading to consecutive quarters of economic contraction.

Taiwan and South Korea: Core Impact on the Semiconductor Industry Chain

In this simulated scenario, Taiwan and South Korea, as global hubs for chip production, would be the most severely affected. Bloomberg points out that the demand for semiconductors from TSMC (TSM-US) (2330-TW), Samsung Electronics, and SK Hynix (SKHY-US) is the main engine driving economic growth in both regions. Once AI capital expenditure collapses, demand would shrink dramatically.

The model shows that this would have an impact of approximately 4% on Taiwan's annual GDP, and the impact on South Korea would exceed 2%.

Core Controversy: Productivity Improvement and Pricing Power

Bloomberg Economics Research believes that there are still concerns about whether the valuations of companies like NVIDIA (NVDA-US), Microsoft (MSFT-US), and Meta (META-US) are reasonable.

Although AI hyperscalers plan to invest tens of billions of dollars, and there is a phenomenon of 'circular investment' among companies, there is currently no evidence that the overall productivity of the economy has significantly improved.

A survey by the National Bureau of Economic Research (NBER) of nearly 6,000 business executives also supports this cautious view: up to 90% of respondents said they had not observed significant productivity improvements from AI in the past three years.

Bloomberg's analysis points out that AI integration is not 'plug-and-play' but a long-term transformation involving organizational restructuring and the integration of old systems. Additionally, as model prices fall rapidly and the gap between open-source models and proprietary models narrows, developers' pricing advantages are being eroded.

Historical Lessons and Future Outlook

From railroads to the internet, historical experience shows that new technologies often experience a painful crash caused by market frenzy before the economy fully benefits. Bloomberg Economics Research warns that investors are currently betting that technical challenges will eventually be overcome, but if their judgment is wrong, the negative wealth effect will weaken consumption, leading to rising unemployment.

While AI may still achieve the vision described by tech optimists, Bloomberg emphasizes that the time needed from technological breakthrough to actual profit realization is often longer than what eager investors expect. If a bubble burst leads to economic slowdown and declining inflation, the model predicts that the Federal Reserve (Fed) and major global central banks will eventually have to shift to stimulative modes, such as interest rate cuts, to address tightening financial conditions.