AI Exuberance and Credit Card Debt: A Recipe for Disaster TLWH 6.5.26

My good friend Paul always has wisdom to share with me. Today, he said that in interacting with people, he keeps his opinions about current events to himself. Unless he’s asked a question directly, at which point he doesn’t pull any punches. Writing a weekly column like this, I don’t have the luxury of keeping my thoughts to myself. So, here we go."

Predicting the future isn’t a strong suit. If a major league baseball player bats 400 in a season, he’s a star. My prognosticating success average would make me a utility outfielder in the minor leagues. 

Old age matters, though, because the more things change, the more they stay the same. “History may not repeat itself, but it echoes.” Over the past half-century, major financial crises have hit close to home and shaken the world. So maybe my opinions are relevant, if overly pessimistic.

Recently, I saw that companies that are Artificial Intelligence (AI) driven are responsible for up to 80% of the growth in the S&P 500 over the last five years. The High Priests of Finance and Government drone on these days about how well the markets are doing, despite the concentration in one yet-to-be-proven industry. Don’t bother telling them Americans are living under a growing affordability crisis. The standard response is to throw back the latest Dow Jones numbers.

It’s important to state that just a tiny group of companies--Nvidia, Alphabet (aka Google), Microsoft, Broadcom, JPMorgan Chase, Palantir, and Meta--account for more than half of the S&P 500’s total annual return. That is an unprecedented level of market concentration. By late 2025, the top five companies alone accounted for 30% of the S&P 500's total value. 

The sheer velocity of the stock market's record highs over the last few years has been driven by artificial intelligence infrastructure, software, and hardware. It is the massive amount of money that major technology companies are spending upfront to build the physical, heavy-duty infrastructure required to run and train artificial intelligence models that are said to be putting people out of jobs. I think of all these AI ventures the way I think of religions: they can’t all be right, but many, if not all could be wrong. When concentrated markets crash, our economy (people) suffer.

We may be moving from boom into bust territory, and this time the bust will be brutal.

I spent the Dot-Com Bubble years of the late 90s on the rugged North Shore, safely insulated from the investment fever. Back then, wild financial speculation was rampant. Any startup that stuck ".com" onto its name didn't need a solid business plan, a physical product, or a single dime of earnings to raise millions and watch its stock price double overnight. By the peak, people genuinely believed the market had outgrown the laws of gravity. 

Watching from a safe distance, I wasn’t surprised when the ceiling caved in. After the NASDAQ peaked on March 10, 2000, it spent two years sliding to rock bottom, erasing an estimated $5 trillion in wealth and losing nearly 80% of its value. Even Amazon, a survivor of the wreckage, watched its stock crater from over $100 down to just $6.

In addition to touting the transformative, if unproven, power of AI and the performance of stock market indexes, the people entrusted with protecting American consumers are ignoring some troubling signs. 

Struggling with stubborn, multi-year inflation fatigue, many people are spending more than they have coming in. To do that, they are scraping their savings or increasingly using their credit cards, borrowing on them despite interest rates in the 20-30% annual range. That is a recipe for disaster, even if those astronomical interest payments keep the Capital One guy and the Discover lady living large in prime-time commercials.

Americans currently owe $1.25 trillion on their credit cards. The percentage of people at least 90 days past due on payments is over 10%, the highest delinquency level in 15 years.

Between the dot-com bust at the turn of the century and the real estate lending wild west that followed a handful of years later, we’ve seen how quickly financial bubbles burst, taking down Wall Street firms and Main Street livelihoods alike. 

My middling success in predicting the future isn’t great. After all, as a property taxpayer in Bloomington when the Mall of America was being built, I firmly believed it would fail and would burden taxpayers for decades to come. Oops. But it seems to me that when one industry attracts too much attention in the markets, and ever more people spend more than they earn, serious money pain will come soon.