Every great financial mania needs its own soundtrack. For the Dutch tulip craze, perhaps it was a lute; for the dot-com boom, maybe a distorted, early-era modem sound. But for the current Artificial Intelligence frenzy, the only tune that truly fits the manic, cyclical, and ultimately dismissive reality is the familiar, slightly frantic melody of “Pop Goes the Weasel.”
The song is a perfect, tiny economic treatise on speculative cycles. Let’s break down how this centuries-old ditty charts the demise of the AI bubble.
Verse One: Half a Pound of Tuppenny Rice…
The opening lines—"Half a pound of tuppenny rice, half a pound of treacle. That’s the way the money goes, pop! goes the weasel"—perfectly encapsulate the initial, cheap inputs that fuel massive, overblown expectations. In the AI gold rush, the "tuppenny rice" is the enormous, essentially free data scraped from the internet, and the "treacle" is the initial flood of accessible, open-source models. The cost of entry was low, attracting every entrepreneur with a PowerPoint deck and a prompt to make their own generative tool.
The money, however, starts going not into the rice and treacle, but into the "buying frenzy." In the AI world, this equates to trillions in venture capital poured into companies that boast huge valuations without a single sustainable profit margin. It’s the sound of capital running out of productive places to go and instead inflating the price of the shiny new thing.
The Looming ‘Pop!’
The song warns us that this spending is unsustainable. The "weasel" in the original context referred to an object pawned to pay debts. In the AI analogy, the weasel is the inflated valuation itself—the paper wealth and unicorn status of a firm. It's the moment when reality, driven by boring metrics like return on investment (ROI) or simply finding enough cheap electricity to run the next data center, finally catches up.
The ‘Pop!’ won't be a sudden, catastrophic market event (like the Lehman Brothers moment) but a decisive, collective realization. It will happen when major investors, having funded five rounds of high-burn, zero-profit startups, collectively decide that anticipated profits are not materializing. When they stop writing the checks, that’s when the 'Pop!' is heard.
The Aftermath: Who Gets the Banjo?
The final, dismissive brilliance of the rhyme lies in its conclusion: the crash won't kill the underlying product. When the bubble bursts, the speculative firms—the "weasels"—will be pawned off, sold for parts, or quietly shut down. The key technology, the actual AI models and the chip infrastructure, will not disappear. Instead, the real utility will be scooped up cheaply by the established tech giants (the "Magnificent 7") who control the essential cloud and hardware.
Ultimately, the AI bubble will burst because the cost of delivering on the hype remains exponentially higher than the revenue generated. The bubble isn't a tragedy; it's a necessary, cyclical clearing event. It's a reminder that no matter how futuristic the technology, human psychology and basic financial equations remain rooted in the nursery rhyme. We’ll be left with a much quieter, more boring, and ultimately more useful technology—and a lot of investors who are now looking around for the next weasel to pop.