Your 401(k) could be at risk if the AI bubble bursts: Treasury report

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...