AI is not just a technological revolution—it’s a financial bubble on a planetary scale, warns Erik Gordon, a professor of entrepreneurship at the University of Michigan’s Ross School of Business. In a Wednesday email to Business Insider, Gordon described the current frenzy around artificial intelligence as being "almost as big as the planet Jupiter," cautioning that when it eventually collapses, the fallout will be widespread and devastating. “The AI bubble is almost as big as the planet Jupiter,” Gordon wrote. “When it bursts, the debris will be everywhere. Big, institutional investors will be hit with it, and so will individual investors who bet the bubble would get even bigger.” He pointed to Microsoft’s recent stock slump as a warning sign. Despite reporting stronger-than-expected earnings, Microsoft’s shares dropped more than 6% after the release of its financial results. Gordon attributed the decline not to poor performance, but to the massive amounts of capital the company is pouring into AI. “That is a warning of the burst to come,” he said. The software giant’s net cash used in investing jumped 95% year-on-year to over $57 billion in the six months ending December. This surge was driven by $49 billion in new property and equipment, primarily data centers and infrastructure needed to support AI development. Microsoft’s stock had nearly doubled since the beginning of 2023, pushing its market capitalization above $3.5 trillion. But the recent correction highlights the growing concern that the company’s aggressive spending may not be sustainable. Other AI-related stocks have seen even more dramatic gains. Nvidia’s shares have surged 13-fold over the same period, valuing the chipmaker at nearly $4.7 trillion—more than 20 times its projected revenue for the fiscal year ending January 25. Palantir’s stock has risen about 25-fold, giving the data analytics firm a market value of $375 billion, or roughly 85 times its forecasted 2025 revenue. Despite these staggering valuations, Gordon does not expect the bubble to burst immediately. He believes investors still have enough capital to keep propping it up, and the pace of technological progress continues to generate excitement that distracts from irrational pricing. Still, the professor has long warned of an “order-of-magnitude overvaluation bubble” in AI. He argues that when it finally collapses, the economic pain will be far worse than what followed the dot-com crash of the early 2000s. So far, the market has largely ignored his warnings, with AI stocks continuing to climb. But Gordon remains convinced that the reckoning is inevitable—and that the fallout will be severe.