LAST Thursday, shares in corporations and businesses up to their necks in the Artificial Intelligence (AI) debt fuelled economic time bomb suffered massive losses as trillions of dollars were wiped off their stock market values.
The US Nasdaq stock index, which contains the main AI ‘super companies’ – including the so-called ‘magnificent seven’ – were hit badly as investors rushed to sell off their shares. The main hit was felt by computer chip and semiconductor makers.
Elon Musk, the world’s richest man on paper, lost nearly $80 billion in one day as investors dumped shares in his Tesla and Space X company, wiping about $450 billion in market value for the two companies.
Nvidia, the US chip making giant, suffered the worst drop in shares during what is being called a stock market ‘bloodbath’. Over $447 billion was wiped off its share value during one session, last Thursday.
The ‘magnificent seven’ tech stocks – Nvidia, Apple, Google, Microsoft, Meta, Amazon and Tesla – account for over a third of the Wall Street stock market.
The collapse of these technology companies’ share prices was the driving force behind a crash on Wall Street that swiftly expanded across Asia and Europe on Friday. Over $3.2 trillion (£2.4 trillion) was wiped off the value of the US stock market on Thursday – bigger than the annual output of the entire Canadian economy.
US President Donald Trump rushed to blame the bloodbath on the unprecedented defeat of the Republican Party in last week midterm elections, blaming the American people for the collapse.
Trump posted on social media: ‘The Stock Market crashed today because the Dumocrats (sic) had a big Tuesday – So sad to see, you only have yourselves to blame.’
Assigning blame to the American people for not voting for Trump’s Republican Party has been common amongst economic commentators.
Democratic nominees won popular support for their opposition to the huge data centres being built across the US that have met with a rising tide of anger amongst ordinary Americans, with polls showing a massive 71% of Americans opposing building data centres in their communities.
The crucial role played by the Trump administration in providing the political backing for these super-sized centres that threaten whole communities, undoubtedly played a role in the landslide victory of the Democrats.
Musk certainly thought these elections posed a make-or-break situation for the AI industry.
He spent a record $450 million backing Republican campaigns that failed dismally.
While the midterm elections may have provided the spark that ignited the flames engulfing the stock markets, the unprecedented explosion in the dominant AI sector have been growing long before the elections.
Analysts have been warning that the astronomical increase in tech companies share valuations have become increasingly detached from reality.
In short, the share price of these mega corporations bear no relation to any profits made from the application of their products.
This was underlined last Thursday in a monetary policy report by the Bank of England which reported that AI had increased higher spending by companies with little if any productivity gains.
The report warned that AI industry forecast growth will be fuelled by $5 trillion, with most of this vast sum coming from debt.
The debt-fuelled AI bubble has been expanding dramatically and has reached the point where the midterm elections have caused a bloodbath in Wall Street and across the stock markets of the world.
Capitalism is diving headlong into a stock market crash leading inevitably to a worldwide economic recession, far worse than that following the crash on Wall Street in 1929 that ushered in the Great Depression of the 1930s.
The powerful working class will never accept being forced to pay for the capitalist crisis.
The working class has the strength to resolve this crisis by rising up and smashing capitalism and going forward to a worldwide socialist planned economy.
This requires the building of sections of the International Committee of the Fourth International in every country to provide the leadership necessary for the victory of the world socialist revolution.
