The International Monetary Fund warns of a potential AI investment bust reminiscent of the dot-com crash, but with less systemic risk. Tech firms are investing heavily in AI infrastructure, yet gains remain unrealized. The AI boom is smaller than the dot-com era, but could trigger broader asset repricing and stress on non-bank financial institutions.

IMF’s World Economic Outlook credits the AI investment boom for propping up U.S. and global growth. However, increased demand and inflation pressures without productivity gains are a concern. Tariffs and reduced immigration are factors contributing to elevated inflation levels. Importers, not exporters, are bearing the brunt of tariffs, contrary to Trump’s predictions.

Chief economist Pierre-Olivier Gourinchas expects a limited decline in U.S. consumer price inflation, staying above the Federal Reserve’s 2% target. The delayed impact of tariffs and reduced labor supply are keeping inflation elevated. Academic studies and business leaders agree that U.S. companies are absorbing the cost of tariffs, not foreign exporters.

Read more at Yahoo Finance: AI investment boom may lead to bust, but not likely systemic crisis, IMF chief economist says