An AI Crash Is Coming. What Then?

In an ominous sign for the artificial intelligence industry, OpenAI reported this week that it had missed its targets for new users and revenue.

The revelation sparked fresh worries about an AI bubble—and an imminent AI crash. According to The Wall Street Journal, Open AI’s own chief financial officer “is worried the company might not be able to pay for future computing contracts if revenue doesn’t grow fast enough.”

Roughly 3,000 data centers are currently operational in the United States, and AI companies are planning to build at least 1,500 more. It’s doubtful the industry can support so many data centers—which is one reason a crash is becoming more probable.

According to Asad Ramzanali, director of AI and technology policy at the Vanderbilt Policy Accelerator, AI investment is on track to surpass “the Manhattan Project, the expansion of electricity, the Apollo space program, building the interstate highway system, broadband buildout during the dot-com bubble, and every other capital effort in U.S. history, except for the Louisiana Purchase and maybe the peak of railroad construction.”

Bain & Company estimates that the AI industry would have to generate $2 trillion in annual revenues to recoup its current level of investment—a figure that seems wildly aspirational at the moment. (By comparison, total federal spending in 2025 was about $7 trillion.)

Also concerning is the risky financial engineering to finance AI infrastructure. “Circular equity investment” and a heavy reliance on “private credit”—i.e., unregulated credit—are scarily reminiscent of the sketchy financial maneuvers that contributed to the 2008 financial crisis (some of which I saw firsthand—more on that below). Companies are also loading up on debt. Google, for instance, now carries a debt burden of $49 billion—compared to about $15 billion just one year ago. That’s not inherently bad—but it creates vulnerability in the event of a serious downturn.

In one of my earlier incarnations, as a cog in the wheel of Big Law, I did some time in “structured finance”—helping investment bankers create exotic debt-fueled financing arrangements that as a clueless junior lawyer I honestly didn’t fully understand. I helped close gazillions of dollars in transactions for “collateralized debt obligations,” “collateralized trust certificates,” and funky flavors of “mortgage-backed securities,” often involving multiple tiers of financial entities created out of thin air. Many of the investment banks that engineered these transactions—like Bear Stearns and Lehman Brothers—went bust.

History threatens to repeat. The AI industry’s complex and incestuous financing arrangements “obscure risks and increase the precarity of financial markets,” says Vanderbilt’s Ramzanali.

Ending this over-financialization of AI is one of many recommendations in Ramzanali’s new report, After the Crash, which offers a blueprint for how to mitigate the impacts of a potential AI-led economic catastrophe. Ramazanali, who served as chief of staff and deputy director for strategy at the Office of Science and Technology Policy under President Joe Biden, also proposes a “Digital Works Progress Administration” to cope with mass unemployment.

You can watch an interview with Ramzanali in a sneak-peek version of the Monthly podcast below. (The full episode will be out next week.)

New at the Monthly…

Supreme injustice. The Supreme Court ruled this week to gut the Voting Rights Act. While unquestionably devastating, the decision was also not unexpected. Voting rights expert Joshua Douglas calls it the culmination of a decades-long project by the conservative majority to eviscerate civil rights protections. “American democracy will be much weaker as a result,” he writes. The ruling has already unleashed Republican lawmakers salivating at a chance to tilt the field in their favor. This week, Louisiana Governor Jeff Landry said he would suspend the state’s primaries—scheduled for May 16—to accommodate the drawing of a new map eliminating the state’s two majority-minority districts. Read Josh’s analysis here.

Corruption du jour. The Trump administration is currently “in discussions” to bail out the United Arab Emirates as it struggles with the economic consequences of the Iran war—but the real beneficiary might be Trump himself, writes historian Mike Lofgren. That’s because the UAE is a big investor in Trump’s businesses. “That a portion of UAE’s assets are invested in Trump and his family … gives off more than a whiff—more like a stench—of corruption,” Mike writes. Read here.

Raise the wage. Yes, companies can in fact afford to pay their workers more, and it won’t kill the economy. Using reams of real-world evidence, economist Arindrajit Dube “skewers popular arguments against raising the minimum wage,” writes Jacob Fuller in his review of Dube’s book, The Wage Standard. Dube estimates that companies are paying as much as 20 percent less than they would in a perfectly competitive economy. Read here.

The I-word. Contributing writer David Atkins calls out the spinelessness of Congressional Republicans who whisper against Trump but lack the courage to act. “It would take fewer than two dozen of the 535 members of Congress to take a stand for the preservation of the American republic,” he writes. David also argues that, given so many prominent MAGA influencer defections lately, a Republican who broke ranks in favor of impeachment could survive politically. Read here.

Bait and switch. Many families struggle to understand college financial aid offers—a situation that may suit colleges just fine. The Hechinger Report’s Meredith Kolodner reports that colleges managed to water down legislation that would have required colleges to use a standardized form for financial aid offers so that students can compare apples to apples when making a decision. “In fact, the new bill specifically prevents the Education Department from requiring a standard offer letter,” Kolodner writes. Is there any wonder that higher education has a trust problem with the public? Read here.

Plus…

Marc Levin of the Council on Criminal Justice shares good news on the progress of criminal justice reform. James Zirin warns that the Trump administration’s legal harassment of Federal Reserve chairman Jerome Powell may not, in fact, be over. Former White House speechwriter Zev Karlin-Neumann urges commencement speakers to skip the Hallmark sentiments and take a stand for democracy. Journalist Michael McGough notes how Catholic support for Trump was slipping even before his feud with the Pope. Jonathan Zimmerman argues for more nuance in the current debate over Michael Jackson and his alleged crimes. Politics Editor Bill Scher compares the insurgent Senate campaigns of Maine’s Graham Platner and Michigan’s Mallory McMorrow and finds that one of these candidates might be getting a lot more latitude for controversial social media posts. In another column this week, Bill also makes what should be an obvious point—political assassinations don’t achieve the aims assassins claim they want.

Coda (spring reading edition)…

The Monthly is one of the few outlets left in America with a robust selection of nonfiction book reviews. ICYMI, here are some of our latest recommendations:

The Descent: Witnessing Russia’s Spiral Into Madness Under Putin, by Marc Bennetts. “Searing and deeply personal,” writes Publisher Emeritus Markos Kounalakis, who was himself a foreign correspondent in Moscow. Mutiny: The Rise and Revolt of the College-Educated Working Class, by Noam Scheiber. This journey into the travails of baristas with bachelor’s degrees is “a wake-up call to fundamentally reform higher education,” writes Obama administration veteran Kenneth Baer. Killers of Roe, by Amy Littlefield. “For anyone who is enraged over the loss of Roe,” declares journalist Clara Bingham, “this is required reading.” Hated by All the Right People, by Jason Zengerle. Jacob Heilbrunn calls this Tucker Carlson biography “a vivid, well-researched, and astute portrait” of one of America’s most dangerous and polarizing figures. The Science of Second Chances, by Jennifer Doleac. For those who care about what really works to bring down crime, this book is a “well-organized, well-reasoned, thought-provoking volume that merits close attention,” writes Stanford professor Keith Humphreys.

One book not worth your while is constitutional scholar Alan Dershowitz’s book on why Trump can legally serve a third term. Legal Affairs Editor Garrett Epps, once an admirer of the ubiquitous Harvard professor and appellate attorney, suffered through the book (so you don’t have to), and found Dershowitz’s argument rather unconvincing.

As always, thanks for reading, liking, and sharing.

Have a great week!

Anne Kim, Senior Editor

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