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Is recent stock market excitement over artificial intelligence starting to feel a bit artificial?
Could we be heading for a crash?
I am far more worried about that than others.
I would give it a higher probability than I think is probably priced in the market and by others.
I find it hard to believe that AI can carry us through, particularly the shutdown of the government.
This is World Business Report from the BBC World Service.
I'm Ed Butler, and today we're looking in depth at the boom in artificial intelligence.
Stock prices are surging, but what if it's a bubble about to burst?
Also, can Switzerland afford its top price tariffs?
So where exactly are we at the moment with the boom in artificial intelligence?
We're going to be looking at that in more detail shortly.
But first, let's hear from the man who many describe as America's top banker.
Our business editor, Simon Jack, has been speaking in a rare and exclusive interview with Jamie Dimon.
He's the chief executive and chair of the American financial giant JPMorgan Chase.
Simon asked him whether he sees the threat of a correction coming in the AI market because of an AI bubble.
I am far more worried about that than others.
So if you said now I'm talking about probabilities, I would give it a higher probability than I think is probably priced in the market and by others.
So if the market's pricing in 10%, I would say it's more like 30%.
So one third chance of a correction.
Yeah, I'm not saying next year.
Because the timing of these things is almost impossible.
So it could be what, six months?
Could be a year?
Could be six months, could be two years.
Okay, so someone in the next six months or two years, you see a high probability of a correction.
Yeah, you see a lot of things out there that you know the amount of uncertainty, and I put geopolitics in that category, fiscal spend in that category, politics in that category, the remilitarization of the world in that category.
All these things cause a lot of issues that we don't know how they're going to sort out.
So I say the level of uncertainty should be higher in most people's minds than what I call normal.
Normal always has quite a bit of uncertainty, by the way.
If you look at some of the things that are going on in the AI and the tech space, you've got, you know Nvidia taking stakes in open AI, Microsoft taking stakes in open AI, the federal government taking stakes in Intel.
There's all these cross holdings.
It looks a bit weird, doesn't it?
A little bit, yeah.
How would you describe it?
Well, AI is a little bit different, you know, and there are some justification for vendor finance and things like that.
So you literally have to go through each one.
Regarding America's investments, I think you know when people talk about stockpiling, you know things like crypto.
I say we should be stockpiling bullets, guns and bombs.
I mean, the world is a much more dangerous place and I'd rather have safety than not.
But you got to look at there is unfair trade that should be countered by methods, something I call industrial policy.
And I'm talking about important unfair trade.
It's not terrible, but there is some, and that's why you need some of these things.
And then there's also national security related.
And some of those, the only way to fix it might be industrial policy.
And I think the government did a great job in MP Materials, which we help bank, but they have a contract for magnets with the government.
The government bought some of the stocks.
They've already benefited enormously.
It gives this company a chance to survive and build a great magnet company in the United States, giving us something we need for our military supplies, et cetera.
So you're in favor of interventionist government in private markets?
Very carefully.
I'm not going to comment each one, but I have a comment each one.
I wouldn't do all of them, but it is what it is.
There's nothing I can do about it.
And some of my opinions are kept private on that.
Okay, but is it possible to tell whether you're in a bubble before it bursts?
It feels like, in terms of AI valuation.
Some of these companies like Nvidia and, you know.
It's only possible to tell what I said in terms of very high valuations.
It's really impossible to tell the burst.
No one's really forecasting that.
And there's all that hype out there.
And then you also take AI.
There's a lot of money going into it.
But the better way, I look at the better way, AI is real.
AI in total pay off.
Just like cars in total pay off.
TV in total pay off.
But most people involved in it didn't do well.
So some of this money will be wasted.
So think of the internet bubble you mentioned, where I think a trillion dollars was lost at one point.
You do have Google, Facebook, YouTube, Microsoft.
You have huge things that came out of it that are hugely beneficial.
But does that mean some of the money being spent right now will inevitably be wasted money in the final analysis?
Probably, yeah.
Jamie Dimon of JPMorgan Chase.
A reminder, you can hear the whole interview with him on the Big Boss interview podcast on Sounds, including his wider concerns about inflation, the US becoming a less reliable partner in his words on the world stage.
It's well worth a listen.
So let's examine that talk of froth in the US market.
Does Jamie Dimon have a point?
In the absence of tech-related spending.
The US is, in fact, in well close to recession this year.
Many economists are arguing.
The head of the Bank of England and the IMF have been issuing warnings this week.
Our tech reporter, Lily Jamali, joins me now from Silicon Valley.
Hi, Lily.
I know that interview has attracted a lot of comment in the US media in the last few hours since it broke on the BBC.
What are the tech folks saying?
Yeah well, that interview is attracting attention for good reason, because people pay attention when Jamie Dimon speaks.
And the fact that he is saying that we may be in a bubble, it's noteworthy here.
And I'm hearing that from a A lot of people in Silicon Valley, it really depends on who you talk to.
If you talk to these upstart younger entrepreneurs that have a huge stake in AI succeeding, they are not the ones that are sounding the alarms right now, as you might imagine.
But it's the older entrepreneurs, people like Jerry Kaplan, who I spoke to recently.
He's a longtime AI entrepreneur who has been through four bubbles during his time here in the Valley industry.
He is going out there and saying, we are absolutely in a massive bubble.
And when it bursts, it is going to hurt.
Wow.
AI companies, of course.
I mean, it's important to say this.
They are investing hundreds of billions of very real dollars into very real infrastructure, aren't they?
Other companies, they're buying your AI products.
Last month a joint venture between Oracle OpenAI, SoftBanks or a billion-dollar data center in Texas.
NVIDIA's reached $4 trillion market valuation, hasn't it?
And so has Microsoft.
So something real is taking place, but a lot of it is very much on the stock market in valuations for companies that aren't yet making a profit.
That's correct.
OpenAI being at the forefront of that, a company that is making a lot of revenue, bringing money in.
People are paying them for their services, but they have never turned a profit.
And they, again, are the ones that brought on the AI consumer era with ChatGPT.
I want to bring your attention to one particular deal involving OpenAI.
NVIDIA's deal that was announced I think last month, very end of last month, where they it's a 100 billion arrangement with OpenAI, investment in OpenAI.
And part of the point here is really for OpenAI to be able to afford NVIDIA's you know, very sophisticated AI chips.
It's not a requirement that OpenAI spend the money on NVIDIA chips, but it's sort of expected that that's where a lot of this money is going to go, and that's what's drawing so many concerns worries from investors, worries from analysts.
Bless you.
This idea of circular financing, where you give a company money so that they can buy products from you that can really –.
And make it hard to understand just how much demand is there really for open AI products.
OK, Lily, thank you.
Sneezing in the background, we heard Kerry Leahy a moment ago.
He's an economist at Columbia University in New York.
Kerry, I hope you're still with us, our regular markets guest.
How many is it on the NASDAQ who are basically pulling more than 400 others forward at the moment on the stock exchange?
Well, that's one of the ways to look at it.
And it certainly is true that we have a lot of bubble-like characteristics such as that.
The difficulty, of course and we already alluded to it earlier and you mentioned it you don't know you're in a bubble until you're actually out of it and you've gone down.
But I would still make the point that even if 80% of what Silicon Valley is telling us is hype.
It's still going to be an important technological innovation.
But, as we all remember, Ford didn't invent the motor car, but he made the money marketing somebody else's car.
So the first people don't make the money.
That's another thing that Jamie Dime was alluding to.
If you get in early, it doesn't mean you're going to be happy five or ten years later with your investment.
OK, Kerry, one final thought.
Does this feel exacerbated right now by more wide attentions?
Unease, I guess, amongst ordinary Americans within the economy that's, you know, stuck in an extended shutdown.
We've got 19,000 flight delays in the US this week, I was reading.
I mean, it doesn't help that feeling that things are kind of creaking.
That's right.
And you're basically keeping your head above water or better yet, treading water.
And now you've got AI and it may make you a well-educated knowledge worker obsolete.
So that doesn't give you a warm and fuzzy feeling about much of anything.
Indeed.
Kerry Leahy and Lily Jamali, thank you both very much indeed.
The German Chancellor Friedrich Merz has vowed to do everything possible to counter EU rules banning the sale of new CO2-emitting cars after 2035.
These are the new rules the EU is threatening to bring in.
After crisis talks with the car sector leaders, Mr Merz told reporters he believes the deadline is unrealistic and the industry needs more time to transition to electrification.
Based on what I can do in the European Union and with the partners in the European Union.
If I have my way, and I will do everything to achieve this, there will be no such hard cut in 2035.
We need an opening here.
We need appropriate flexibility.
In plain language, this means that the automotive industry and suppliers in Germany want to encourage themselves to continue researching and developing old conceivable drive technologies and to ensure that we achieve climate neutrality together in a variety of ways.
Well, the Chancellor was speaking at a meeting organised against the backdrop of falling sales and layoffs at Germany's various car giants companies like Volkswagen, BMW and Mercedes-Benz.
They've been struggling with fierce competition from Chinese electric vehicles recently, as our international business news reporter, Theo Leggett's been telling me.
Well, the auto industry in Germany is extremely important economically.
So you have the Volkswagen Group, you've got Mercedes-Benz, you've got BMW.
And that industry is suffering at the moment.
It's suffering from falling sales and falling profits.
And part of it is what's been happening in China.
Now these carmakers invested a lot of money into expanding into China, because China, just a few years ago, was seen as a very lucrative market.
It was where all the growth was. an expanding middle class with money, able to buy high-end cars.
But that has changed.
The market has slimmed down.
There are a lot more domestic manufacturers, particularly manufacturers of electric cars.
So competition in that market is cutthroat and the profits aren't coming in the way they once were.
At the same time, on the European markets, Chinese manufacturers, finding that their own market is oversupplied, are now moving into the European market.
And the transition to electric cars has given them an avenue for doing that.
And then, on top of that, let's not forget that exports to the United States have been hit by Donald Trump's decision to introduce tariffs of 15 on new vehicles, all of which is creating something of a perfect storm, not just for German car manufacturers, but for the European industry as a whole.
And, as you say, not just the Germans Ferrari, the Italian luxury car maker, halving its EV targets.
We're hearing as profit guidance has disappointed there.
You've been speaking to Lamborghini, another luxury car maker.
Yes, and they have an electric car in the pipeline, but they're delaying it for a few years because they think that the enthusiasm for electric cars isn't there.
And let's not forget that this is a carmaker that works in a very rarefied environment.
People buy these kinds of cars.
Ferrari, too, because they have screaming loud engines.
There's a passion in there.
There's something visceral.
And having a whispering, quiet electric car, even if it looks great, might not be the same thing.
So they've always had an incentive.
But The real key issue is what happens with the mass market car makers.
And they now seem to be pushing back and pushing back quite hard against the deadline which, in the European Union, is 2035.
Carbon dioxide emissions from cars by that deadline should be phased out completely, which basically means a move towards electric cars.
There is now a very strong movement, which clearly has the backing of of the German Chancellor, Friedrich Merz, after the latest round of talks, to have these targets watered down a bit, maybe allow hybrids, for example, to continue for longer, so that the amount of investment that has to be put in place quickly and, above all, the amount of marketing getting people into electric cars can be slowed down a bit, because consumer reluctance is also an issue that needs to be overcome.
And in the timeline that we're seeing at the moment, it might have seemed like a long way off a few years ago.
Now it's not that far off at all.
It's less than a decade.
So there are concerns that all of this is happening too quickly and that the industry is under so much pressure it can't really cope at the moment.
And the EV bubble is going to burst, or at least that is the argument being put forward.
I don't think the EV bubble is going to burst simply because a phenomenal amount of investment has been put into electric vehicle development already.
And you know the car makers who have been developing these EVs.
They want to see a return on that investment.
It's a question of how quickly the mass market develops.
And there have been concerns that over the past few years, it hasn't grown quickly enough.
Now, some of the blame for that may be on national governments who, once they saw the market starting to expand, began withdrawing subsidies which made electric cars cheaper, putting all the onus on the manufacturers to bring down the costs of electric cars, which historically have been higher than So.
The question now is who is responsible for expanding the EV market?
Is it governments by subsidising the cost of EVs and the infrastructure that goes with them?
Or is it left entirely to the market, which means that carmakers themselves have to find ways of making these cars cheaper?
And the fact is, the more people buy them, the cheaper they become.
But there is a threshold you have to cross first.
There is a sort of critical mass and we're not there yet.
Theo Leggett, you're with World Business Report from the BBC World Service.
This is Jacob Goldstein from What's Your Problem?
Business software is expensive.
And when you buy software from lots of different companies, it's not only expensive, it gets confusing, slow to use, hard to integrate.
Odoo solves that because all Odoo software is connected on a single affordable platform.
Save money without missing out on the features you need.
Odoo has no hidden costs and no limit on features or data.
Odoo has over 60 apps available for any needs your business might have, all at no additional charge.
Everything from websites to sales to inventory to accounting, all linked and talking to each other.
Check out Odoo at odoo.com.
That's odoo.com.
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Just time now for some of the other market stories.
Kerry Leahy is back with us now.
Kerry.
Tesla is being investigated by the US government after reports the firm's self-driving cars had broken traffic laws.
What's this about?
Well, they've been having difficulties with the self-driving cars.
You know the stories about people being hurt, if not seriously injured.
So it's just showing the difficulty of having that technology work.
Tesla's been a whiz at figuring out how to do just about everything electronically in the vehicle, but they haven't figured out how to deal with self-driving to be fully safe and to obey all the laws regarding automobiles on the road and in the factory.
And indeed driving on the right side of the road, according to some of the allegations in this filing.
So another story, the first brands.
Tell me more about this company.
There are claims by creditors that as much as $2.3 billion has simply vanished from this company.
This is the auto supplier that went bust earlier.
Well, it's extraordinary that you can have smart, well-informed people say two weeks ago, there's not a problem, there's an industry, and then there is a serious problem.
And the fact that billions in an even larger market can be blown away in just a couple of weeks is sadly not that unusual.
So people who have been negative about the market for years now have been looking for where will the first light.
That means the beginning of the end.
This may be it, given how poorly it's been handled by just about everybody on Wall Street.
Final quick thought the US Treasury Secretary this is a story breaking the last few hours Scott Besant.
He said that the United States has purchased Pesos and agreed a 20 billion currency swap with Argentina's central bank.
That sounds like pretty good news, I guess, for President Xavier Millet there.
Well, they're in a lot of problems.
And while the US has done this in the past and used something called the Exchange Stabilization Fund to do it, they are going, I think, beyond what people would normally think would happen.
And it may end up that Trump and Argentina are going to get basically hooked up at the hip.
And once you go in, it's very hard to get out.
Interesting.
We'll watch that one.
Kerry Leahy, thank you very much indeed.
China has pledged to rein in what it calls disorderly price competition today.
This amidst growing signs of deflationary pressure in the Chinese economy.
This is a big traditional holiday period in China.
Over the last few days, we've seen Golden Week, as it's known.
A total domestic tourism trips there have reached 100%.
$113 billion in revenue, according to state figures.
This is slightly up from last year, but perhaps it has been driven by massive price cutting.
Some Chinese hotels and holiday firms have dropped their prices by as much as 60, it's been reported.
I've been talking about this with Han Shen Lin in Shanghai.
He's the China country director at the economic think tank, the Asia Group.
Just today, the nearby cafe run by a young lady.
She had decided to shut down the café because she couldn't keep up with the larger corporate chains.
So let me give you an example.
Specifically, she was concerned that the larger chains were offering 10 cups of coffee for 40 jemimbi.
Now, if you happen to be from the US, that's the equivalent of $5.56.
So in other words, you can get a coffee for 56 cents.
Now compare that against whether you're in the UK or the US.
It's a ridiculously low price, but this is the type of situation where, when there continues to be price deflation, it is continually causing small businesses to collapse.
It's a big deal, right?
I think even Xi Jinping has talked about this.
He calls it involution.
Essentially, what is going on?
What's driving this?
This involution, which is a term that, up until a few years ago, nobody really heard about, was really the idea that, as the economy is starting to slow down, everyone is fighting for market share.
And so if they're going to survive, they're going to have to cut prices.
And it's a competitive process where it keeps escalating faster and faster.
Now, you would think that's wonderful for consumers as they see prices go down.
But the problems are when it affects businesses, where they see decreased demand, lower margins And, as a result, they have to lay off people, causing unemployment.
Yeah.
And this is all happening during Golden Week.
Well, I mean, it's been happening for a while, but it's happening now in Golden Week in China, which is a big deal, right.
I mean, it's a big holiday season for regular Chinese families.
They travel, they meet each other, potentially they might even spend some money.
But we're seeing all these prices falling.
I mean, are people actually spending anything?
Yeah.
You know, people want to spend, but they're a lot more cautious about spending.
So certainly when I'm sitting here in Shanghai and I'm looking, I see a lot of people traveling around, but their budgets are a lot tighter.
So rather than spend maybe on big ticket items, they tend to be much more modest at going to perhaps more reasonable priced restaurants, for example.
Are the regulators trying to step in?
Seriously, can you do anything to stop this trend from a central government point of view?
You know, there's very little the government can do to really enforce it.
But the problem is this.
They're addressing the right issue, which is when you look at China's broader economy.
The biggest problem area of concern is China's slowing consumption.
And that's supposed to make a larger part of China's future economic growth.
But if people don't have confidence in the future, they're not willing to spend.
Now, there are different ways you can try to address this issue.
Maybe you should have a stronger social safety net.
And China wants to do that.
But the other approach is to simply try to tell businesses, stop lowering prices.
But that's a very difficult proposition to enforce.
So in many ways, the government's trying everything.
It's kind of like throwing mud on the wall to see what sticks.
Han Shen Lin of the Asia Group.
Now President Donald Trump has hit many countries around the world with tariffs this year, China among them.
But few have been hit quite as hard as Switzerland, which has been slammed with duties of some 39 on its exports to the US.
Imogen Fuchs has been gauging the impact on Swiss businesses.
The 1st of August, 2025.
Across Switzerland, families were celebrating Swiss National Day, getting together for brunch in the mountains, barbecuing the traditional Cyrillic sausages and then shattering news.
The president is escalating his global trade tariff for Switzerland with a 39 tariff.
I was actually on a plane to the US when I first read about it and I simply could not believe what I was seeing.
For me, who has been dedicated his whole career, the last 30 years, to promoting the Swiss excellence into building things that not many others can, I was stunned.
The shock among Swiss business leaders was profound for Donald Trump.
The fact that tiny Switzerland, with a population of just 9 million people, sells more to the US than it buys is intolerable.
Look, I did something with Switzerland the other day, and they paid essentially no tariffs.
And I said, we have a $41 billion deficit with you.
Two months on, efforts to negotiate with Washington have proved fruitless.
The Swiss president is expected to leave Washington without a deal.
The Swiss economy, regularly ranked as the most competitive in the world, is slowing down.
17 of Swiss exports are sold to the US, a significant percentage that Switzerland can't afford to lose overnight.
Jan Atislander, Director of International Trade for the Swiss Business Federation, Economy Suisse, says the US gains more from Switzerland than quality cheese and chocolate, and he's still at a loss to understand President Trump's strategy.
In the era of research and development, we are the biggest foreign investor in the United States.
We employ hundreds of thousands of US citizens. in the United States, and we pay the best salaries.
So which Swiss products are most affected by the 39%?
First of all is pharma.
Second, not surprisingly, is watches.
Then actually comes medtech.
Adrian Hunn is managing director of Swiss Medtech, the trade body representing Switzerland's medical technology industry.
We're doing a lot of life-saving and life-improving devices knee implants pacemakers, dental implants, surgical instruments and much more.
Gilles Robert is chief executive officer of MPS, Micro Precision Systems.
From aortic valve replacements to the tiniest of surgical drills used in hip or knee replacements, it produces things a wealthy country with an aging and increasingly overweight population like the US really needs.
They had the best price before the new tariffs came into effect.
So that means we don't have this leeway of giving a discount to our customers, because the margins are already as low as they can be.
What people don't understand is the country eats the tariff.
The company eats the tariff.
President Trump has promised US citizens that the countries he is punishing with tariffs will swallow the cost of them.
Adrian Hun of Swiss Medtech agrees with Gilles Robert that this will be bad news for US patients and US taxpayers.
Imogen Fuchs with that report from Switzerland.
Don't forget to subscribe wherever you get your podcasts.
You can also get the daily edition of World Business Express, which brings you the latest money and work news every weekday.
And that's it for today's edition of World Business Report.
From me, Ed Butler, and the rest of the team in Salford, take care.
Thank you.
