A draft Treasury Department report is warning that an artificial intelligence bubble could put millions of Americans’ retirement savings at risk if the industry goes through a major downturn — even as leaders from Washington to Silicon Valley tout AI as the engine of a new economic boom.
The internal analysis, obtained by NOTUS, concludes that AI companies have become so deeply embedded in financial markets that a sharp contraction would ripple far beyond Silicon Valley, hitting stock markets, private credit, banks, utilities, chipmakers and cloud providers — sectors that dominate many retirement portfolios.
The report likens parts of today’s AI investment frenzy to the dot-com bubble, though it concludes any fallout would likely be less severe than the crash that followed the internet boom in the early 2000s.
Career Treasury analysts wrote that today’s AI giants are generally larger, more profitable and better capitalized than the speculative internet companies that collapsed during the dot-com era.
Still, they warned that investors are betting heavily on AI companies delivering the rapid productivity gains and profits currently embedded in lofty valuations.
If those expectations fall short, the report says, companies could slash spending, investors could pull back and economic growth could slow.
That could leave ordinary Americans vulnerable even if they have never purchased shares in an AI company directly.
Mark J. White, a wealth advisor at Mark White Wealth Advisors, said the bigger risk isn’t artificial intelligence itself, but the growing concentration inside many retirement portfolios.
“The biggest risk isn’t AI itself — it’s investors forgetting the importance of diversification,” White told The Post.
“Many 401(k) participants own broad market index funds, which have naturally become more concentrated in a handful of large technology companies as those firms have grown. That concentration has boosted returns, but it also means portfolios may be more vulnerable if those stocks experience a meaningful correction.”
Rather than abandoning stocks, White said long-term investors should focus on diversification by maintaining exposure to smaller companies, international stocks and high-quality bonds.
A Treasury spokesperson distanced the department from the draft, saying it does not represent official policy.
“The official position of the Secretary and the US Treasury is that Artificial intelligence will be a key driver of America’s new Golden Age,” the spokesperson told NOTUS.
“AI has the potential to deliver unprecedented productivity gains, expand economic opportunity, and empower American workers and businesses.”
Treasury Secretary Scott Bessent has repeatedly championed AI investment, recently praising major technology companies for planning roughly $750 billion in AI infrastructure spending this year while arguing the greatest threat is allowing China to gain the technological upper hand.
The Treasury report also identifies a series of broader risks that could derail AI’s momentum, including geopolitical tensions, supply-chain disruptions, electricity shortages and companies failing to generate enough revenue to justify massive capital spending.
President Trump has promoted aggressive AI investment and has even floated the idea of the federal government taking ownership stakes in AI companies so Americans could share in the industry’s growth.
Treasury officials, meanwhile, emphasized that the administration remains committed to supporting AI innovation while working with regulators to monitor financial risks.
The draft report is awaiting formal approval before being distributed to senior officials including Bessent, Federal Reserve Chair Kevin Warsh and other federal financial regulators, according to NOTUS.
The Post has sought comment from the Treasury and the White House.