The AI Bubble is Showing Serious Signs of Cracking

Jun 1, 2026

Stock valuations have almost never been higher.

  - The Buffet Indicator is at 233, the highest ever recorded. Market cap to GDP has never been higher.

  - The Schiller Adjusted Price to Earnings ratio is the second highest recorded in 145 years. At current valuations, it would take over 40 years to recover the investment through earnings. 

  - The Bank of America Bull and Bear Indicator is screaming sell again. The past 17 times stocks dropped 2-20% the following 2-3 months.

 

Companies that have scaled AI are experiencing usage costs that exceed the employees they fired.

   - Microsoft invested $5 billion in Claude AI and recently banned their engineers using it due to exorbitant costs.

   - Uber blew through their annual AI usage budget by April 2026.

 

Chinese AI has massively dropped AI usage costs.

  - Chinese AI can process about 80% of American AI functions.

  - Chinese is up to 95% cheaper than American AI.

  - This destroys the American AI profit model.

 

Tech stock valuations are priced for perfection. This could be the beginning of the end of the AI bubble.

 

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