Former US Treasury Secretary Robert Rubin warned on October 7, 2026, that the current investment boom in artificial intelligence presents significant financial and social risks. He argues that market valuations currently fail to account for the uncertainties surrounding the rapid pace of capital expenditure in a technology that has yet to fully demonstrate its long-term returns.
Rubin highlighted the concept of circularity risk, which describes the complex web of financial commitments between AI chipmakers, software firms, customers, and investors. This interconnectedness creates a self-reinforcing demand structure where, if expected returns do not materialize, these overlapping relationships could amplify financial losses across the entire ecosystem.
Drawing parallels to the internet boom of the late 1990s, Rubin noted that while AI offers potential productivity gains, current market valuations may be driven more by enthusiasm than by proven earnings. He suggested that investors should prioritize the quality of demand from end customers over revenue that merely cycles through partners and backers.
On the same day, Ray Dalio also expressed concerns regarding debt-financed spending within the AI sector. The combination of high capital intensity, rising interest rates, and the potential for a market bubble has led to increased scrutiny of hyperscalers and their massive investments in data centers and computing capacity.
