Episode supported by​ ​The Retort​

Jeffrey Funk Explains Why The AI Bubble is Crashing and The Shady Circular Financing

Dr Jeffrey Funk returns to discuss how the current AI boom is driven not by healthy demand or sustainable profits, but by shady circular financing and hype.

It is becoming more evident that we are living through an OpenAI bubble following the release of ChatGPT in late 2022! Jeff compares this unprecedented AI surge with past bubbles, explaining why standard bubble metrics used by the usual experts and analysts have completely missed the mark.

Jeff argues that AI is a bubble, but not in the same way as the dot-com or the 1929 bubble, because the structure is centred on a few firms rather than a broad market. Traditional bubble metrics like price-to-earnings ratios are misleading, as most companies in the market are not actually benefiting from AI!

Jeff also looks at the warning signs in hyperscaler cash flow, semiconductor suppliers, and the Korean market, which experienced a historic stock market crash in late July 2026, with the benchmark KOSPI index plunging over 33% during the month.

We delved into the broader damage caused by this bubble that distorted startup incentives, media and VC hype cycles, and what could happen when the bubble finally breaks.

We shared examples from AI labs, media sponsorships, and the growing disconnect between business logic and the way AI is sold to investors. And we discuss how AI hype has shifted from useful niche applications to grand claims about AGI, singularity, and curing everything from cancer to layoffs.

Join the conversation and let’s discuss how the AI bubble may be approaching a breaking point, including OpenAI’s centrality, hyperscaler cash flow strain, and weakening confidence in major AI-linked stocks. My concern is that it could also bring the end of entrepreneurship as we know it! Hold on to your seats, folks.

• ​00:00:00 – Preview
• ​00:02:07 – Why did economic experts and the mainstream media fail to see the AI bubble coming?
• ​00:06:43 – What is a bubble, and why is the AI bubble fundamentally different from previous technology hype cycles?
• ​00:18:53 – How a lack of basic understanding about AI’s capabilities and limitations led to extraordinary claims and questionable investment decisions
• ​00:23:08 – Are people waking up to the realities of AI? How data centres damaged trust in the sector and could create serious problems for Oracle
• ​00:29:01 – How China’s approach to AI differs from Silicon Valley and why it may be better insulated from an AI bubble crash
• ​00:34:18 – The fallacy of AGI and singularity claims, and how analysts failed to question whether these promises were technically or economically viable
• ​00:43:27 – Questionable financial reporting, circular financing and the financial engineering underpinning the AI boom
• ​00:48:47 – How AI companies and VCs pay for positive media coverage, influencer content and podcasts — and Tim reveals that he was approached by one of these companies
• ​00:53:04 – AD: The Retort’s campaign to protect independent media and journalism, and how you can support our independence
• ​00:54:21 – The South Korean market crash of July 2026 and its potential impact on the stability of US and global financial markets
• ​00:58:28 – Are SoftBank and Oracle among the biggest potential losers of the AI bubble, and could either face a serious financial crisis?
• ​01:00:38 – The political and regulatory failure to prevent the overinflation of the AI bubble and adequately protect investors
• ​01:02:22 – Who will be the biggest losers after an AI bubble crash, who will be held responsible, and where will the blame ultimately fall?