As artificial intelligence continues reshaping education and industries, some Mississippi State University professors say the rapid rise of AI companies could have real consequences for student investors, faculty researchers and Mississippi’s economy.
Recently, the tech company Nvidia became the first public company ever valued at $5 trillion, according to CNBC. Over the past few years, the graphics processing unit manufacturer has become a leader in the recent AI market boom.
What is a bubble?
In economics, a bubble is a situation in which the price of an asset rises above its actual value. In general terms, bubbles are created when people enter a cycle of overconfidence in an asset, leading them to put more money into it than they probably should. Bubbles “burst” whenever confidence in that asset drops sharply.
Why the AI boom matters to MSU
Artificial intelligence has begun to touch nearly every corner of MSU, from the new AI degree program to student investments through the College of Business.
Large tech companies like Nvidia, Apple, Microsoft, Alphabet and Meta take up a third of the U.S. stock market value according to Investopedia, and something each of these companies has in common is a large investment towards AI.
Brandon Cline, a professor of finance in the MSU College of Business, said uncertainty is the biggest challenge.
“We don’t really know where things end up,” Cline said.
While a bubble burst would hit large institutional investors hardest, Cline said, in his opinion, smaller investors, like college students, may not see the same long-term damage.
“What I tell students is that, with the dot-com bubble, if you had first stopped trading whenever you knew that we were likely in a bubble, then you would have missed out on the biggest returns perhaps of your lifetime,” he said.
Cline also compared it to the 2008 real estate crash, during which small investors were allowed to buy land at lower prices from those with large real estate investments.
Anwar Bou Mosleh, another professor in the Department of Finance and Economics, agreed that large investors could see losses. But he pointed out that many major companies have already experienced substantial gains in recent years, which could cushion the impact.
On the technical side of the AI bubble debate, Christopher Hudson, a professor in the Department of Computer Science and Engineering, said it is possible AI is reaching a plateau.
By ‘plateau’, Dr. Hudson explained, he means that companies will eventually recognize that AI is not advancing as quickly as they might have hoped. He predicted that AI will continue to advance across different fields, which should keep investments steady, just not at the current level.
“My personal opinion is that there’s been a heavy investment, I won’t deny that. I just don’t think it’s going to crash and run like a lot of people think of”, Hudson said.
Rising costs and concerns
Artificial intelligence is expensive to develop and even more expensive to maintain. According to MarketWatch, ChatGPT-3 cost $50 million to develop, while ChatGPT-4 cost $500 million and ChatGPT-5 cost $5 billion.
Source: New York Times, CNBC, PYMNTS, Latka, TapTwiceDigital
Carter Scaggs
The industry’s environmental footprint is also significant. In 2024, the Pew Research Center found that the energy required to power a single data center is equal to Pakistan’s annual electricity demand.
Companies like Microsoft, Google, Meta and Nvidia have invested billions of dollars in AI, meaning that if one major company faces losses, the rest could follow.
A look back at the dot-com bubble
For many economists, the closest comparison to today’s AI boom is the dot-com bubble of the early 2000s.
During that time, media speculation and the self-promotion of emerging Silicon Valley caught the attention of investors worldwide. During that time, investors rushed into internet companies without fully understanding their profitability. By 1999, 39% of all venture capital investments went towards Internet companies.
However, in March 2000, those stocks began to drop according to Time magazine. Interest rates were rising, the Y2K scare swept the world, and investors began to notice that Internet companies spent more than they actually earned. By 2001, an estimated $5 trillion in market value had disappeared. Companies like Pets.com, eToys, Kozmo.com, and UrbanFetch went from being household names to being nearly bankrupt. While other companies like Amazon, Google, Yahoo, and Priceline managed to survive, the crash left them still seeing losses in the billions.
Researchers say today’s situation is not identical to the one in the past. Artificial intelligence is already deeply embedded in businesses, universities and everyday tools. But the pattern of rapid investment and uncertain profits is similar enough to raise concerns.
What could trigger an AI bubble to burst?
The primary concern about an AI bubble is that its bursting could have devastating consequences for the stock market and the global economy.
In an interview with The Economist, United Nations IMF director Gita Gopinath warned that the world economy is heavily dependent on the American stock market and that a crash similar to the dot-com era’s could lead to a global loss of $35 trillion for investors. Gopinath further stated that, with the current U.S. debt and the level of market uncertainty, an economic comeback could take years if the market were to collapse.
Interest rates are generally increased whenever the Federal Reserve System attempts to curb inflation. However, one downside of higher interest rates is that the stock market declines typically as rates rise.
While the FRS currently seems to be encouraging lower interest rates, those rates cannot stay low forever. As inflation rises nationwide, the Fed might face both internal and external pressure to raise rates.
