If the rapidly expanding artificial intelligence bubble suddenly bursts, British taxpayers could be left facing a colossal bill, echoing the controversial bank bailouts of the 2008 financial crisis. This alarming parallel is drawn by a leading academic, who warns that the AI sector has become deeply entangled with essential public services, making it potentially 'too big to fail'.
The Looming Shadow of a Multi-Trillion Pound Collapse
The scale of the potential problem is staggering. The major AI firms now boast a combined value exceeding £2 trillion, dwarfing the banks at the time of their crisis. These companies are interconnected through a complex web of deals and investments worth hundreds of billions.
Despite a recent study indicating that 95% of generative AI pilots at companies are failing, public sector adoption is accelerating. The UK government has declared it is going 'all in' on AI, actively integrating the technology into critical areas including the NHS, national defence, and the education system.
This deep integration into the fabric of daily life is what creates the systemic risk. Just as the banking system was deemed crucial to society's functioning in 2008, AI is rapidly achieving the same status.
From Silicon Valley to Whitehall: Who Bears the Cost?
The central question is who would ultimately pay if the AI gamble fails. During the financial crisis, the UK government officially spent £23 billion to bail out the banks, a cost of roughly £700 per taxpayer. In the US, the taxpayer contribution was an estimated US$498 billion (£362 billion).
Now, imagine a future where a fictional AI provider, 'Eh-Aye', is integral to your healthcare, your child's schooling, and your personal finances. If such a company faced collapse, the government would be under immense pressure to intervene, likely passing the cost to the public.
This raises difficult questions: would the UK government cut funding from the already strained NHS or siphon money from education to save failing AI firms? Would it need to bail out pension funds that had over-invested in the technology?
The Faith and Doubt Fueling the AI Gold Rush
For now, investment continues to flood into AI. Proponents argue that the pursuit of Artificial General Intelligence (AGI)—AI with human-like cognitive abilities—is critical and will ultimately transform our lives for the better.
However, significant scepticism exists. Commentators like computer scientists Gary Marcus and Richard Sutton have publicly doubted AI's ability to achieve true intelligence. Research from the University of Bath and even within tech giant Apple has highlighted the reasoning limitations of large language models (LLMs).
According to Akhil Bhardwaj, an Associate Professor at the University of Bath, the bubble's growth is sustained by a 'pragmatic kind of faith' from AI pioneers. The danger is that this act of faith is also a massive gamble, one where taxpayers' money is unwittingly on the table.
With no safeguards in place to protect the public purse, the future promised by AI firms remains a high-stakes uncertainty. Governments and businesses, fearful of being left behind, are charging ahead, potentially setting the stage for another public-funded rescue.
