The artificial intelligence boom might seem like a concern only for Silicon Valley tech enthusiasts and wealthy investors, but new analysis suggests ordinary taxpayers could ultimately bear the financial burden if the AI bubble bursts.
The Too-Big-to-Fail AI Sector
Recent assessments indicate that the AI industry has grown so massive that it may have become too big to fail, drawing parallels to the banking sector before the 2008 financial crisis. The combined value of major AI companies now exceeds 2 trillion pounds, dwarfing the valuation of many traditional banks during their peak.
What makes this situation particularly concerning is the complex web of interconnections between AI firms through hundreds of billions of dollars in deals and investments. This entanglement creates systemic risk similar to what we witnessed in the financial sector fifteen years ago.
Public Services Becoming AI-Dependent
The UK government has declared it's going all in on AI, actively incorporating artificial intelligence into critical public services including education, defense, healthcare, court systems, and passport applications. This widespread adoption makes AI integration a fundamental aspect of daily life for citizens.
Despite a recent study revealing that 95 percent of generative AI pilots at companies are failing, the public sector continues to embrace the technology enthusiastically. The deeper AI embeds itself into essential services, the more dependent society becomes on its continuous operation.
Learning from Banking Bailouts
The precedent for government intervention in private sector failures was firmly established during the 2008 financial crisis. In the United Kingdom, the official cost of bailing out banks reached 23 billion pounds, approximately 700 pounds per taxpayer. Across the Atlantic, American taxpayers shouldered an estimated USD 498 billion (362 billion pounds) in bailout costs.
The justification for these massive interventions was simple: the entire financial system would have collapsed without government support. Similarly, as AI becomes increasingly essential to healthcare, education, and personal finance, the companies providing these AI capabilities transform into organizations that modern life depends upon.
The Faith Versus Reality Divide
AI supporters maintain that continued investment is crucial despite current failures, arguing that achieving artificial general intelligence (AGI) - the point where AI matches human cognitive capabilities - will dramatically improve human life. However, prominent computer scientists including Gary Marcus and Richard Sutton have expressed skepticism about AI's potential to develop true intelligence.
Academic research from multiple universities, including studies at tech giant Apple, has highlighted the limitations of large language models (LLMs) in reasoning tasks. This creates a significant gap between the optimistic faith of AI pioneers and the technological reality.
Who Bears the Ultimate Risk?
The critical question remains: if the AI gamble fails and the bubble bursts, who ultimately pays the price? Would the UK government cut funding from the National Health Service or redirect money from already strained education budgets? Would pension funds that over-invested in AI require taxpayer-funded bailouts?
One certainty emerges from this analysis: the future promised by AI companies carries no guarantees. Yet governments and businesses fear missing out if they don't participate in the AI revolution. Meanwhile, no adequate safeguards exist to protect taxpayers from potential financial fallout when - not if - the bubble eventually deflates.
