Phil Called It: The 2025 Timeline of an AI Bubble and Consumer Collapse

The year 2025 has been characterized by stark economic contrasts: unprecedented technological exuberance juxtaposed with deepening consumer distress. For investors and analysts following the macro-economic skepticism of Phil Davis and the team at PhilStockWorld.com (PSW), the dominant themes of the year—the Artificial Intelligence (AI) boom, extreme market concentration, and severe consumer erosion—have played out precisely along the lines Phil Davis warned about in his early 2025 timeline.

This article examines how the core components of the PSW thesis regarding the AI bubble, wealth concentration, consumer erosion, and resulting systemic risks have manifested throughout 2025, validating key predictions while raising pressing questions about the future.

The Bubble and the Oligarchy

A persistent focus of the PSW timeline was the dangerous overvaluation and concentration driving the stock market. As early as January 3, 2025, Phil warned that the fundamentals were pushing the Nasdaq to 40x earnings and the S&P over 30x, which was "just too much to sustain".

This valuation concern was tied directly to the overwhelming market influence of the "Magnificent Seven" (M7) stocks.

What Phil Called:

• Market Concentration: In January 2025, Phil noted that the M7 represented 34% of the S&P 500’s value. By March, he argued that the M7's combined $12.3T valuation meant the market was effectively an "oligarchy".
• Validation: By the start of 2025, concentration had reached a new extreme, with the ten largest companies in the S&P 500 comprising nearly 40% of the index, making the index more concentrated than at any other time in history. The Russell 1000 Growth Index traded at a forward P/E of over 30x. Historically, such concentration peaks (like 1980 and 2000) led to subsequent years of underperformance for the largest companies.
• Earnings Disparity: PSW noted that the M7 contributed 86.7% of the S&P 500's earnings growth in the previous year. This trend continued, with the M7 delivering 26% year-over-year EPS growth in Q2 2025, versus only 2–4% for the remaining 493 S&P companies, highlighting significant concentration risk.

The Great Tech Circle Jerk and Systemic Risk

The most powerful prediction from the PSW timeline related to the nature of the AI boom itself—that it was being artificially inflated by circular financial arrangements. Phil famously asked, "It occurs to me all these tech companies are just giving money back and forth to each other – somehow it doesn’t seem real and, if it’s not real, are the valuations?". This concept was quickly formalized as the “Tech’s Money Merry-Go-Round” and analyzed as the "greatest financial shell game in modern history," where $1 billion in real economic value created $4 billion in reported “revenues” through intercompany spending.

What Phil Called:

• Circular Financing: Phil warned this financial structure was based on "bullshit accounting practices" and systemic interdependence, comparing the AI bubble to the "2008 Financial Crisis".
• Validation: This concern was validated by key deals that escalated in October 2025. Nvidia (NVDA), the most valuable company in the world with a market capitalization over $4.5 trillion, announced a partnership to invest up to $100 billion in OpenAI to fund data centers, with OpenAI committing to filling those sites with millions of Nvidia chips. This deal immediately drew criticism from analysts who compared it to vendor-financing subsidies seen during the dot-com bubble.
• Escalation of Interlinkages: The "Circle Jerk" thesis gained further weight when OpenAI struck a similar deal with Nvidia rival Advanced Micro Devices Inc. (AMD), potentially making OpenAI one of AMD’s largest shareholders. OpenAI also struck a $300 billion deal with Oracle (ORCL) for data centers, which in turn is spending billions on Nvidia chips, creating a tangled web where money flows back to Nvidia, one of OpenAI's prominent backers.
• Systemic Implications: Leading UK tech investor James Anderson called the sudden valuation jumps "disconcerting" and noted the vendor financing parallels to the 1999–2000 telecom bubble. Furthermore, reports confirmed that this interconnected web of business transactions is "artificially propping up the trillion-dollar AI boom", raising concerns about systemic risk. Systemic risk is the potential for the collapse of an entire system due to interlinkages and interdependencies, and the failure of a single, highly connected entity can cause a cascading failure.

The Two-Speed Economy and Consumer Collapse

Simultaneous to the AI boom, Phil Davis repeatedly highlighted the extreme divergence between the wealthy elite and the struggling mass consumer base, creating a two-speed economy.

What Phil Called:

• Income Inequality: Phil asserted in February 2025 that "Never in the history of the Planet Earth has Income Inequality been so pronounced as the United States in 2025". He observed that mass-market retailers were struggling, while luxury and niche retailers were thriving.
• Validation: This prediction was quantitatively confirmed by outside research. An analysis by Moody's Analytics found that the top 10% of U.S. households account for 49.7% of consumer spending—a record since at least 1989. This reliance means that the growth in U.S. GDP is heavily dependent on the spending habits of the highest earners. From September 2023 to September 2024, the highest 10% of earners increased their spending by 12%, while spending by lower- and middle-income earners declined.
• Consumer Stress and Debt: The PSW timeline tracked the collapse of Consumer Sentiment to Depression-level lows (57.0 in March, 58.2 in August). Phil warned that personal spending was being funded by debt, leading to a soaring $1.21 Trillion Credit Card Debt. In August 2025, the student loan debt crisis was highlighted, exploding above 10% delinquency.
• Validation: Consumer behavior reports confirmed that Americans are "feeling the pinch" and are cutting costs by eating out less, switching from name brands to store-brand items, and shopping at discount stores. The high costs of persistent inflation are forcing households to become more conscious about their purchasing decisions. Furthermore, U.S. consumer delinquencies are now at their highest levels since the Great Recession. In October 2025, the PSW timeline recorded a dramatic drop in new Consumer Credit growth, indicating that "Consumers stopped new borrowing completely," signaling recession.

The Future: What Remains to be Seen

While many of Phil Davis's warnings regarding valuations, circular deals, and consumer fragility have been borne out by events and data through late 2025, the ultimate outcome remains uncertain. The central tension is whether the staggering investment in AI will yield genuine, widespread productivity gains, or whether the current boom will conclude in a period of severe financial correction.

Key Uncertainties ...