From AI to Labubu, from gold to Crypto: Why are global speculative bubbles everywhere?

Are we in an “irrational prosperity”? From the surge in Tech Stocks to the crash of Meme coins, from data center financing to the Labubu craze, speculative bubbles are expanding globally in sync. This article is based on a piece by Bloomberg, organized, compiled, and written by Foresight News.
(Background recap: 40x returns in one month, how P small players seize $LABUBU )
(Additional context: The valuation challenge of Chinese meme coins: How far is it from the “Binance life” to the DOGE legend?)

Two months before the stock market crash on “Black Monday” that triggered the Great Depression, an economist named Roger Babson in Massachusetts expressed deep concern about the wave of retail investors borrowing money to speculate in stocks. In a speech, he declared: “The stock market crash is coming sooner or later, and it could be devastating.” Subsequently, the market fell 3%, a decline at the time called the “Babson Crash.” But as Andrew Ross Sorkin writes in his compelling new book 1929: The Inside Story of the Most Severe Crash in Wall Street History and How It Destroyed a Nation, in the following weeks, “the market shook off Babson’s ominous prediction,” partly because of optimistic expectations for new mass consumer products like radios and automobiles, “imaginative investors once again took the lead.”

Today, many “disaster prophets” like Babson are warning about risks in the artificial intelligence (AI) field, especially regarding the valuations of publicly listed and private tech companies, and their blind pursuit of the elusive goal of artificial general intelligence (AGI)—a system capable of performing nearly all human tasks, or even surpassing human abilities. Data analytics firm Omdia shows that by 2030, annual spending by tech companies on data centers will approach $1.6 trillion. The hype around AI is enormous, but its prospects as a profit-making tool remain purely hypothetical, leaving many clear-headed investors puzzled. However, just like a century ago, the mentality of “fear of missing out on the next big opportunity” drives many companies to ignore these “doomsday predictions.” Advait Arun, a climate finance and energy infrastructure analyst at the Public Enterprise Center, states: “These companies are like playing a ‘mad lyric-filling’ game, believing that these bold technologies can solve all existing problems.” He recently published a report titled Either a Bubble or Nothing, similar in style to Babson’s views, questioning the financing behind data center projects and pointing out that “we are undoubtedly still in an irrational prosperity phase.”

Tech stocks soar:

Source: Bloomberg

(This chart uses three index lines—the S&P 500, the S&P 500 Information Technology sector, and the Morgan Stanley AI Beneficiaries Index—to show the process from 2015 to 2025 in the US stock market, where AI-related stocks surged dramatically due to hype and then retreated as bubbles burst, diverging from the broader market and traditional tech sectors, reflecting the speculative boom and bust risks in the AI field.)

Journalists should generally avoid debating whether a resource or technology is overvalued. Regarding whether we are in an “AI bubble,” I don’t have a strong stance, but I suspect the question itself might be too narrow. If we define a “speculative bubble” as “an asset’s value detached from its fundamental worth, experiencing unsustainable rises,” then bubbles are almost everywhere, seemingly expanding and contracting in unison.

Børge Brende, CEO of the World Economic Forum, points out that bubbles may exist in gold and government bonds. He recently stated that since World War II, the overall debt levels of countries have never been as severe; as of December 12, gold prices have soared nearly 64% in a year. Many financial practitioners believe there is also a bubble in the private credit sector. This market, worth $3 trillion, is financed by large investment institutions (many of which fund AI data centers), and is not tightly regulated by commercial banks. Jeffrey Gundlach, founder and CEO of asset management firm DoubleLine Capital, recently called this opaque, unregulated lending phenomenon “junk loans” on Bloomberg’s Odd Lots podcast; Jamie Dimon, CEO of JPMorgan Chase, called it “a tinderbox for a financial crisis.”

The most absurd phenomena appear in areas where “intrinsic value is hard to judge.” For example, from the start of the year to October 6, BTC’s total market cap increased by $636 billion, but by December 12, it had not only given back all gains but also experienced a larger decline. According to data from crypto media company Blockworks, Meme coins used to commemorate internet hotspots peaked at $170 billion in trading volume in January, but by September, they plummeted to $19 billion. The biggest losers were TRUMP and MELANIA—these coins, launched by the U.S. First Family two days before the presidential inauguration, have fallen 88% and 99% respectively since January 19.

Many investors evaluate these cryptocurrencies not based on their potential to create intrinsic value for shareholders and society (like traditional stocks that report profits), but purely on the opportunity to “make quick money.” Their attitude toward cryptocurrencies is like gambling at a dice table in Las Vegas—full of speculation.

Especially among groups attracted by crypto, sports betting, and online prediction markets, there may be demographic reasons behind trying to manipulate the financial markets as a casino. A recent Harris Poll shows that 60% of Americans now desire to amass great wealth; among Generation Z and Millennials, 70% want to become billionaires, while only 51% of Generation X and Baby Boomers share this goal. A study by financial firm Empower last year found that Generation Z believes “financial success” requires an annual salary of nearly $600,000 and a net worth of $10 million.

Thanks to TikTok videos, group chats, Reddit, and the internet’s “instant and unregulated” nature, people worldwide can learn about earning opportunities simultaneously. In principle, this seems harmless, but in practice, it has sparked imitation waves, fierce competition, and “groupthink”—a phenomenon that makes the new Apple TV series Pluribus particularly timely. Traditional economics, with its complex and diverse dimensions, has been replaced by the “attention economy”: the idea that “at any given moment, the world is obsessed with something.”

In business, the focus of this “collective obsession” is AI; in pop culture, after Pedro Pascal, there is Sydney Sweeney, and the “6-7 craze” (if you don’t have teenagers at home, Google it). Over the past year, thanks to Korean pop group BLACKPINK member Lisa and other celebrities, the “cute but worthless” animal plush toys from Chinese toy manufacturer Pop Mart International Group have become a global craze, which we might call “Labubble” (a portmanteau of Labubu and bubble).

The food industry also clearly exhibits a “protein bubble”: from popcorn makers to breakfast cereal producers, everyone is promoting their products’ “protein content” to attract health-conscious consumers and GLP-1 (a diabetes drug often used for weight loss) users. In media, Substack newsletters, celebrity-hosted podcasts (like Amy Poehler’s Parks & Recollection and Meghan Markle’s The Female Founders’ Confession), and nearly weekly releases of “authorized celebrity biopics” (such as Netflix’s Becoming Eddie about Eddie Murphy and a documentary about Victoria Beckham) may also be bubbles. W. David Marx, author of The Space of the Void: 21st Century Cultural History, states: “Today, everyone’s ‘reference group’ is global, far beyond the visible scope around them, surpassing their actual social class and status. In these markets, a ‘global synchronized trend’ that was previously impossible may emerge.”

Of course, the risks in the AI field are far greater than those related to the “Labubu craze.” No company wants to fall behind, so all industry giants are racing forward, building computing infrastructure through “complex financing arrangements.” Sometimes, this involves “special purpose vehicles” (remember those from the 2008 financial crisis?)—these entities carry debt used to purchase NVIDIA graphics processors (AI chips), and some observers believe the depreciation rate of these chips could be faster than expected.

Tech giants are capable of bearing any consequences of this “FOMO-driven hype”: they mainly rely on strong balance sheets to fund data centers, even if white-collar workers generally think “the current version of ChatGPT is enough to write annual self-assessments,” these giants can handle it calmly. But other companies are taking more risky measures. Oracle— a conservative database provider— unlikely to challenge in the AI boom, is raising $38 billion in debt to build data centers in Texas and Wisconsin.

Other so-called “new cloud vendors” (like CoreWeave, Fluidstack, and other relatively young companies) are constructing dedicated data centers for AI, Bitcoin mining, and other uses, and are also heavily borrowing. At this point, the “cumulative impact” of the AI bubble begins to look increasingly severe. Gil Luria, managing director of D.A. Davidson & Co., warns: “When some institutions borrow billions to build data centers that have no real clients, I start to worry. Lending to speculative investments has never been wise.”

Researcher Carlota Perez, who has studied economic booms and busts for decades, also expresses concern. She notes that in an “over-leveraged, fragile, casino-like economy where bubbles burst as soon as doubts spread,” technological innovation is being transformed into high-risk speculation. She wrote in an email: “If the AI and cryptocurrency markets collapse, it could trigger an unimaginable global crisis. Historically, only when the financial sector pays the price for its actions (rather than always being rescued), and society constrains it through proper regulation, will a truly productive golden age arrive.” Until then, hold tight to your Labubu plush toy.