What if AI fails to live up to the hype?

AI's backers are touting lofty visions for how the technology can change our lives for the better — claiming it will cure cancer, solve climate change and make us all rich.Why it matters: The hype sounds outlandish, but it will need to deliver.U.S. companies are pouring staggering amounts of money, talent and attention into AI, inflating a massive bubble.If AI falls well short of its promise, a crash could ripple across global financial markets, governments and society.You can see the hype in investments, infrastructure and market moves.Tech giants are offering 9-figure pay packages to elite AI researchers.The technology is guzzling energy. AI alone could soon consume as much electricity as 22% of all U.S. households, MIT Technology Review reports. AI data centers use fresh water to cool systems. One study found that generating a single 100-word email on ChatGPT uses up to three 16.9-ounce water bottles.Data center investment drove more GDP growth than consumer spending last quarter.The bull market in stocks is highly reliant on the AI narrative, Mike Treacy, vice president of risk at Apex Fintech Solutions, tells Axios.Zoom in: CEOs and technologists who are bullish on AI are betting that the investments will be worth the enormous price.“There will be universal high income (not merely basic income). Everyone will have the best medical care, food, home, transport and everything else. Sustainable abundance,” Elon Musk recently posted on X.Anthropic CEO Dario Amodei wrote that AI could eventually bring about the “elimination of most cancer.”By the numbers: The market is increasingly concentrated in a small group of tech giants — and they’re relying on each other’s AI spending to drive growth.Seven large-cap companies tied to AI make up 35% of the S&P 500’s market cap.Microsoft, Meta, Amazon, Alphabet and Tesla account for over 40% of Nvidia’s revenue by buying its AI chips, according to corporate filings.They’re collectively pouring more than $400 billion into AI capital expenditure this year.Yes, but: While companies and investors are buzzing over AI, real-world use is emerging slowly, The Atlantic's Rogé Karma reports.Some 71% of companies are using generative AI but most (80+%) of them say it has had no "tangible impact" on earnings, a March McKinsey report found.Some companies that cut staff assuming AI could fill the gap are now rehiring, says Andrea Derler, economist and head of research at Visier, a data analytics platform for businesses. If the Big Tech companies pull back on their immense spending on AI, Nvidia could lose 40% of its sales.That would ripple through the market, where Nvidia alone makes up 7% of the S&P 500 and 3% of the global stock market.Reality check: It's still early, Stanford economist Erik Brynjolfsson told The Atlantic. "With AI, we're in the early, negative part of the J-curve." Businesses entrenched in long-standing practices are struggling to deploy the technology — but once they figure it out, adoption will take off, he said.Indeed, companies like Google, Microsoft and Meta are finally generating real revenue from their AI investments, Axios' Ina Fried reports.Oracle’s recent blowout earnings shows how AI can deliver profits, Mandeep Singh of Bloomberg Intelligence tells Axios. Hiring has already slowed, and Singh attributes this in part to AI increasing productivity.The bottom line: AI's promise is sky-high — and with trillions of dollars, staggering energy use and markets at stake, so is the pressure to deliver.

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