Stiglitz warns AI bubble could burst, urges India to protect its services sector
Speaking at the Hindustan Times Leadership Summit 2026, the Nobel laureate says AI’s ability to replace coders threatens India’s export miracle, even as tech firms struggle to deliver promised returns.
New Delhi: Renowned economist Joseph Stiglitz has warned that the AI boom resembles a bubble, which could pose risks to India's services sector, according to reports from the Hindustan Times Leadership Summit 2026. Stiglitz expressed concern about the impact of AI on the labor force, particularly in the US, where it is most effective at replacing coders and programmers.
He noted that India's services export miracle has largely depended on these same jobs. The economist pointed out that AI lacks a viable macroeconomic model, and companies pouring investments into AI may struggle to generate the expected returns. Stiglitz argued that redistribution of wealth generated by AI could help sustain the technology, but emphasized that such measures are unlikely to work across borders.
He also highlighted that between 30% and 32% of recent US growth has come from data centers, a rate he deemed unsustainable. Stiglitz warned that AI companies are promising returns they cannot deliver, relying on monopoly power that will never be achieved. With competition already eroding profits, some open-source models are collapsing costs, and US frontier firms are training on cheap Chinese models. Despite these challenges, Stiglitz believes that AI will survive, even if the companies do not.
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