Here’s a new one. Not only is AI about to take your job and leave you on the street — it’s about to destroy your retirement account as well.
As the Washington Post observed in new reporting on the AI bubble, speculative investment into AI development is now the dominant force driving the US economy. By the numbers, the US GDP has grown at a rate of 1.6 percent so far this year, on pace to hit the 2.8 percent growth it achieved in 2024. That’s all well and good on paper, except for the troubling fact that two-thirds of that growth came from AI, per WaPo‘s analysis.
That’s a major red flag, as computer and software investments currently represent about 6 percent of the total US economy. 70 percent of the US’ nearly $28 trillion GDP, meanwhile, is made up of consumer spending — a category that’s now been eclipsed by the AI boom. In other words, the roles are now reversed, with a very small chunk of the economy dragging the rest of us along.
Callie Cox, a market strategist, told WaPo that the situation is “unusual,” to say the least: “What drives the economy quarter by quarter is almost always consumer spending.”
This being the case, the inevitable question becomes: what happens if AI spending stops or slows down?
The short answer: the largest tech firms could likely weather the storm, while AI startups and private companies reliant on venture capital to the pay the bills would crumble into dust. Energy and construction markets would likewise suffer, as new data center development grinds to a halt. The effect on Wall Street — which could see the S&P 500 lose as much as 30 percent of its expected revenue growth, WaPo notes — would be devastating.
And if the AI bubble does burst, one of the lesser-remarked dangers would be its effect on retirement funds. As WaPo points out, public markets are now dominated by tech companies, which means any fluctuation in their bottom line could have a “powerful influence” on 401(k) accounts — not to mention other retirement savings vehicles like IRAs, or the rest of the economy.
“We’re now locked into a particular version of the market and the future where all roads lead to big tech,” Amba Kak, the co-executive director of the AI Now Institute, a tech policy think tank, told Inc. Magazine.
Way back in April, personal finance outlet Investopedia warned its readers that “few would escape the pain” of an eventual AI crash, given the concentration of tech stocks among the S&P 500. So far in 2025, the magnificent seven — the tech companies Meta, Apple, Google, Amazon, Tesla, Microsoft, and Nvidia — account for about 36 percent of the index’s total market cap, a major concentration of wealth, in other words.
As strategic advisor Dion Hinchcliffe recently put it to Forbes: “the danger isn’t just the Mag 7 falling, it’s that the rest of the index is simply too weak to pick up the slack when they do.”
More on the AI bubble: You Might Want to Ditch Your AI Investments Now That Jim Cramer Says No Bubble Is Coming
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