Is AI a bubble? It all depends, we are told, on whether massive investments in the technology will massively boost productivity. Optimists are convinced that future productivity gains will be colossal, even if a market correction is necessary to draw some hot air out of the current boom. Pessimists, from Goldman Sachs’s Jim Covello to MIT’s Daron Acemoglu, have their doubts. But optimists and pessimists alike are in the grip of what I call the AI productivity delusion.

What both sides miss is that AI will devastate capitalism even if it boosts productivity beyond our imaginations - and regar...