Bubble, Bubble, toil & trouble

We already have a massively inflated economic bubble in both the US share market and tech company expansion that is going to burst sooner or later. The US share market is massively overvalued by any measure. The price to earnings (P/E) ratio measures how many years of profits (at the current earnings rate) it takes to recoup an investment in the stock. AI says: “The S&P 500’s current ten-year cyclically adjusted price-to-earnings (CAPE) ratio, also known as the Shiller P/E ratio, suggests the market is strongly overvalued.

As of November 13, 2025, the key figures for the S&P 500 Shiller P/E ratio are:

• Current Ratio: Approximately 39.73.
• Historical Average (Mean): Around 17.31.
• Historical Median: Around 16.06.

“The current Shiller P/E ratio is more than double its long-term historical average, which historically signals an overvalued market and potential for lower long-term returns. The current valuation is the second highest ever recorded, surpassed only by the peak during the dot.com bubble in December 1999, when it reached 44.19″. Yahoo Finance reports that the “Warren Buffett indicator, which adds up the total market capitalisation (market cap) of all publicly traded US companies and divides it by the country’s gross domestic product (GDP), has pushed well past 200%, a level Buffett has in the past called ‘playing with fire'”.

“Buffett in 2001 called this ratio ‘probably the best single measure of where valuations stand at any given moment’, because it captures the entire stock market’s value relative to the size of the economy. Going back to 1970, it has averaged about 85%. While the Buffett indicator is not necessarily a timing tool, its current level does tell us that stocks as a group are expensive relative to the economy”.

In the dot.com bubble it reached around 150-190% of GDP in 1999-2000. Pre-Global Financial Crisis it reached around 140% in 2007. A small handful of companies are driving the vast majority of the growth. Dubbed the “Ten Titans” they are Apple, Tesla, Nvidia, Microsoft, Alphabet, Amazon, Meta, Broadcom, Oracle and Netflix. According to Yahoo Finance the Ten Titans make up 38% of whole S&P 500 stock market. Their share prices have risen around 270% in the last five years while the rest of stock market has been largely stagnant.

Global Dominance Of US Stock Market

The US stock market now makes up 60% of the value of all stock markets in the world up from 40% a decade ago. There is also a massive class inequality in terms of who benefits from stock prices. The richest 1% in the US have 50% of stock and the richest 10% have 93% according to Yahoo Finance in January 2024. The bottom half have 1% of all stock.

CNBC reported (3/10/25) that the total wealth of the top 10% – or those with a net worth of more than $US2 million – reached a record $US113 trillion in the second quarter, up from $US108 trillion in the first quarter, according to the Fed. The increase follows three years of continued growth for those at the top, with the top 10% adding over $US40 trillion to their wealth since 2020. This has been happening for decades, of course. A recent study by the Rand Corporation estimates the loss to working people as a staggering $US50 trillion.

Time magazine reported on a RAND Corporation study with the headline: “The Top 1% Of Americans Have Taken $US50 Trillion From The Bottom 90% – And That’s Made the US Less Secure”. It reported: “According to a groundbreaking new working paper by Carter C Price and Kathryn Edwards of the RAND Corporation, had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $US2.5 trillion higher in the year 2018 alone. That is an amount equal to nearly 12% of GDP – enough to more than double median income – enough to pay every single working American in the bottom nine deciles an additional $US1,144 a month. Every month. Every single year”.

Decades of the rich getting richer through inequality in income has created a massive class imbalance in expenditure well. The Wall Street Journal (23/2/25) reported the top 10% of income earners spend 49.7% of all spending – up from 36% three decades ago. That spending was equivalent of almost one-third of US GDP. That means spending by nearly everyone else is actually falling.

Massive AI Investments Inflating Bubble

Inflating the bubble are also massive investments in the new artificial intelligence (AI) systems. Four big tech companies – Meta, Google, Microsoft, and Amazon – planned to spend over $US300 billion on capital expenditure for AI systems in 2025 “to build out data centers and AI infrastructure that will put them ahead of the competition”. This is double the amount for 2023.

A huge part of this expenditure is to buy Nvidia chips. In 2025 Nvidia became the first five trillion US dollar company. It added another one trillion US dollars in the most recent three months. Its graphics processing units (GPUs) are becoming the bedrock of the AI technology. The company has control over 90% of the market for GPUs used in AI workloads and can extort monopoly profits as a consequence. The Economist reports that: “Its most advanced chips generate gross margins of 90%-plus, according to Jeffrey Emanuel, an investor who published a prescient bear case for Nvidia”. Nvidia buys up all the competition as soon as it can to maintain that monopoly.

However, but Nvidia has been buying up its customers as well to maintain the bubble. Bloomberg raised the alarm with an article headed “Open AI, Nvidia, Fuel $US1 Trillion AI Market With Web Of Circular Deals”, followed by a kicker that read: “A wave of deals and partnerships are escalating concerns that the trillion-dollar AI boom is being propped up by interconnected business transactions”.

The article is paywalled but the graphic accompanying the report says it all. Among the transactions is one where Nvidia – the chip maker and the only one with something real to sell – invests $US100bn billion in Open AI so they can buy the chips they need. Open AI links a $US300 billion cloud deal with Oracle for services that may never be built. Oracle in turn spends tens of billions on Nvidia chips.

ChatGTP, the app created by Open AI Sam Altman, claims to have 800 million users but only a small percentage are paying customers. In August 2025 MIT reported that 95% of Open AI users not making money. Now the Chinese have started making their own versions free and open source so the chance of ChatGTP being able to impose a tech monopoly to force people to pay like they have done with many other services seems slim.

Too Big To Fail Mantra Heard Again

Even Open AI boss Sam Altman calls it a bubble. He then hints that they may need a Government bailout like the banks received in 2008 because they too are too big to fail and may need the Government as the insurer of last resort. He later tried to walk back these comments as a misunderstanding.

Investment in this bubble has driven whatever real growth there was in the US economy these last few years. Fortune magazine reported (7/10/25) that information processing and equipment equals 4% of GDP in the US but over 90% of GDP growth in the first half of 2025. Growth in all other sectors equals 0.1% growth rate.

Another bottleneck is the impact on electricity prices. Prices for electricity have gone up 38% since 2020. After a decade of stable prices of around 13 cents a kilowatt hour it went up over one third to 17.8c today. This has fuelled a political backlash against data centres. A bubble is about to burst. The risk is that it will take down the broader financial system with it. A banking collapse will recreate the conditions for another great depression like the 1930a. Socialist solutions involving public ownership and democratic planning of finance, energy and big tech are the only logical solutions.