“I know a bubble when I see one,” warned Senator Elizabeth Warren at a policy event in Washington DC. The senator, who led the push for post-2008 consumer financial regulation, invoked parallels between the AI industry and the housing market crash of 2008.

Warren highlighted the rapid growth of AI companies, which she argues have borrowed heavily from opaque sources such as private credit funds, without facing the same regulatory scrutiny as traditional banks. She warned that if these companies fail to generate sufficient revenue quickly enough to service their debts, it could lead to a financial crisis reminiscent of 2008.

“If AI companies are unable to increase revenues with lightning speed, they won’t be able to service their massive debt loads,” Warren said. “And because of shady accounting strategies, the first big stumble will have everyone running for the exits.”

The senator proposed a new digital regulator tasked with antitrust, privacy and consumer protection issues, advocating that Congress should not bail out these companies if they falter. Warren’s proposal echoes her earlier efforts to prevent similar financial meltdowns.