Artificially Inflated?

What’s going on in Silicon Valley? Revenue is looking good almost across the board. Advancements in artificial intelligence—and the infrastructure that supports it—are surging. But layoffs also keep happening. Is this the new paradigm the sector must adjust to?

“Technology firms have announced more than 141,000 job cuts so far this year, according to outplacement firm Challenger, Gray & Christmas, a 17 percent increase from the same period last year,” reports The Washington Post. “In the last two years, the tech workforce has shrunk nationwide by about 3 percent a year, with California posting a much steeper 19 percent drop, according to data from the U.S. Bureau of Labor Statistics.”

Per-employee productivity, possibly enhanced by AI, is on the rise; firms are able to easily make do with less headcount. So it tracks that “the overall level of tech employment will be under pressure,” Mark Zandi, Moody’s chief economist, tells The Washington Post. Of course it will be: This is what efficiency advances look like.

“According to a project from economist Ezra Karger aiming to predict the progress of AI, more than 18 percent of American work hours will be AI-assisted by 2030,” writes Niall Ferguson for The Free Press. “Ten years later, AI will be as important to this century as electricity or the car were to the previous one.”

“AI—or rather the promise of AI—is now the principal driver of both the U.S. economy and the stock market,” continues Ferguson. “Between a sixth and two-fifths of the rise in gross domestic product over the past year is attributable to investments in computer and communications equipment, including chips, data centers, grid upgrades, and AI software.”

Some, like economist/writer Noah Smith, theorize that it’s the AI boom that’s canceling out the economic blow that would otherwise be dealt to the U.S. economy by tariffs. “AI companies have accounted for 80 per cent of the gains in US stocks so far in 2025,” writes Financial Times’ Ruchir Sharma. Smith adds that “more than a fifth of the entire S&P 500 market cap is now just three companies—Nvidia, Microsoft, and Apple—two of which are basically big bets on AI.”

It’s possible these bets don’t yield as much as investors expect, at which point we’re in for a very rude awakening. It’s possible that the productivity gains from AI result in even worse worker displacement than we’re expecting, and the total erasure of a lot of entry-level positions. But it’s also possible that the AI boom serves as a means of enabling greater worker productivity, and softens the pain that would otherwise have been felt during these weird economic times.

As for whether or not AI is a bubble, some—like Tyler Cowen—take the tack that bubbles get too bad of a rep: “A lot of so-called bubbles pay off in the long run” writes Cowen for The Free Press (a theory also advanced by Byrne Hobart).

OpenAI, for example, might have an inflated valuation. But “Nvidia is often considered a bellwether AI stock” since so much of its “revenue comes from selling graphics processing units to power advanced AI systems, meaning that its success gives investors insight into the health of the sector overall,” writes Cowen. “Currently, Nvidia’s stock-price-to-earnings ratio is in the 54 to 55 range, roughly twice the typical market average. That means the market expects great things from this stock. Those projections may or may not be validated, but it’s hard to conclude they’re entirely divorced from reality.” Cowen notes that many of these tech companies have invested their earnings in AI projects, not assuming tons of debt, meaning they’re even less likely to incur a sudden crash.

Scenes from New York: Yep.

This was always the insoluble problem for the “abundance Left”: there is zero appetite for this politics within the Democratic Party, and they will dutifully vote for a mayor who wants to open government grocery stores and “seize the means of production”—pure anti-abundance. https://t.co/ZfTgmqeawj

— Christopher F. Rufo ⚔️ (@christopherrufo) November 17, 2025

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