Most venture capitalists probably don’t root for the hottest investment theme of the current era to flame out and crash.
But in a post on X on June 30, Vijay Pande, founder of VZ.VC, laid out why he’s rooting for the AI-fueled investing bubble to burst. More than that, he argued that everyone should feel this way, making a case for why the bursting of the AI bubble could be the best thing for the broader economy in the longterm.
“I’m telling you to root for the crash that torches my own asset class,” Pande wrote. “I mean it. The valuations are silly, the data-center spending is feverish, and half the people I talk to are quietly bracing for the fall.”
Pande said that he thinks a stock market crash is inevitable at this point, but when it happens, it will ultimately prove to be a positive development. A reversal of AI mania, he argues, is necessary for a “Renaissance cycle” of growth and rebuilding that comes with the disruption prompted by a new
He highlighted an analysis from economist Carlota Perez, who said that every significant technology surge of the past 250 years followed the same trajectory. They began with a revolution, followed by a financial bubble, a market collapse, and, ultimately, a golden age.
Pande pointed not just to the rise of things like cars and computers, but canals, railways, and steel production. Others, too, have compared the AI surge to the dot-com bubble that sparked the crash of the early 2000s, which in turn gave way to a new generation of innovation and market expansion.
“We are living through the same process now, except the rails of today are compute, data centers, models, and the habit of millions of people learning to think alongside a machine,” he said. “The chips will depreciate, sure, but the chips were never the rail; the power, the grid hookups, the data-center shells, and a generation that learned to work with machines are.”
The memory chips that are powering the AI boom may not survive a stock market crash, but in Pande’s view, durable infrastructure and human habit of learning to work with AI will be the real lasting development, proving valuable when the US begins rebuilding after the crash.
The scenario he sees unfolding is one in which the stock market crash “finishes the build,” “sobers the money” by discouraging the high spending that created the bubble, and ultimately, forces the rebuild in which people figure out how to properly live with the technology.
“The bubble and the crash that ends it are not a detour around the golden age,” Pande added. “They are the road to it. But if done wrong, the same turning point that built the American suburbs built the gulag. The only variable is how we respond.”
