> This... shouldn't be possible.
1. Quite a lot of companies are not publicly traded, and therefore are not reflected in the stock market. AI companies have an incentive to be publicly traded because it's all venture-capital stuff.
2. Technology in general is always going to be over-weight anyway because these are companies that tend towards "growth" (re-investing profits into future expansion, offering to buy back stocks at a higher price as a means of compensating investors, etc.) rather than "value" (compensating investors by paying out an explicit cash dividend on shares). This tends to push their P/E multiples higher.
3. Publicly traded companies, and thus stocks, generally are valued based on speculation about future cash flows, not according to current holdings.
4. The companies that you have to add up in order to come to a figure like "one third of the stock market", are doing a lot of things outside of AI. People still play video games, and they still do GPU-accelerated data analysis with conventional techniques. People still want their computer to include an operating system, and still use their social media to talk to accounts that they know are operated by people they know in real life.
5. The term "AI" is now used as if it exclusively referred to LLMs, but other AI systems have existed for a long time and have been actually accomplishing real things in the economy.
> The economy is going to collapse
There are a great many people out there who have predicted a hundred or so out of the last seven recessions. You don't know this, and there are many reasons to doubt it.
Suppose some anti-AI deity snaps its fingers tomorrow and every LLM simply spontaneously ceases to function. It's not as if we've lost the knowledge of how to do things without LLMs. It's not as if the things we created without LLMs disappear, or anything else. We at worst, at a very conservative, scare-mongering estimate revert to that level; and things were pretty tolerable at that level. And technologies that are not LLMs have also advanced since the release of ChatGPT.