What Happens If AI Fails?, Subprime Data Center Crisis, How Bad Can SpaceX Get?

**Alex Kantrowitz** (0:00)
If the AI buildout stumbles, does the rest of the economy go with it? Is the data center buildout a ticking time bomb? And will SpaceX and Tesla merge? We'll cover it all on a Big Technology Podcast Friday edition right after this.
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**Ranjan Roy** (1:35)
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**Alex Kantrowitz** (1:37)
Welcome to Big Technology Podcast Friday edition where we break down the news in our traditional cool-headed and nuanced format. We have a great show for you today. We're going to talk all about what would happen if AI fails, even one leg on the AI stool starts to crumble, what the implications will be. We're going to talk about whether we're heading towards a subprime data center crisis and how bad SpaceX can get and whether it's planned to merge with Tesla are currently even feasible. Joining us as always on Friday to do it is Ranjan Roy of Margins. Ranjan, good to see you. Welcome back.

**Ranjan Roy** (2:11)
Good to see you, Alex.

**Alex Kantrowitz** (2:13)
This week, I have to say, as I was putting together the show, I definitely felt a little bit more downtrodden than usual. And I can't tell whether that's my mood influencing the way the show is being put together or the world events influencing how we're going to talk about AI this week. I think probably the second. Everything else is going well. It's beautiful outside. We're full swing in summer. You and I are both about to take some vacation.
And right now, things couldn't be better on the outside, but on the inside in AI, things look kind of rough or potentially rough. Because I think with this AI story, we always go back and forth between the technology being very promising, which it is, and the economic story being somewhat in question. And that's always been in the back of our minds and I'm sure of our listeners' minds. And this week, seemingly everywhere, there were certainly signs for caution and concern. So, let me, to begin with, just cite this New York Times story that asks, what will happen to the economy if the AI boom starts to tamp down? The story says, if investor confidence in AI falters, the economy actively built atop it could come crashing down. AI-related stocks account for roughly half of the rise in the S&P 500 this year. Declines in stock prices, even drastic ones, don't necessarily have much impact beyond the world of finance. But what could make this time different is the sheer scale of the stock market. Economic research has found that for every $100 investor gained in their stock portfolios, they spend about $3 more on goods and services, a phenomenon known as the Wealth Effect. But the Wealth Effect also operates in reverse.
When stock prices fall, investors become less willing to spend. And at present valuation, a 30% decline in the stock market could lead to a nearly 700 billion pullback in consumer spending. That could be enough to set off a recession on its own. So basically, obviously none of this has begun yet, but the story argues that if we were to see a pullback on the AI stock bonanza, that could lead to real world problems, potentially even a recession, because people are spending so much because they see their portfolios rise and a large part of the reason why their portfolios are rising are AI stocks one way or another. A legitimate area of concern, Ranjan, or what do you think about the potential negative effects of an AI bust here?