Bubbles/Crises/Manias

A surefire way to make money is to buy stocks in industries experiencing shortages. AI supply-chain bottlenecks will persist for the next few years but markets will price in relief before then.

The AI bubble is a different type of bubble. It is primarily an earnings bubble rather than a valuation bubble. Like all bubbles, the AI bubble will burst. For now, however, our AI demand indicators do not suggest that this is imminent.

Much like the 2000 episode, we expect this year to unfold in two stages: A “Great Rotation” from tech stocks to non-tech names in the first half of 2026 followed by a broad-based selloff in stocks in the second half on the back of a weakening US economy.

This year, we once again present our 2026 outlook as a retrospective from the future – a future in which the AI boom turned to bust.

Next week, please join me for a Webcast on Wednesday, December 17 at 10:30 AM EST (3:30 PM GMT, 4:30 PM CET) to discuss the economy and financial markets. We will also host a Webcast for APAC on Tuesday, December 16 at 8:00 PM EST (9:00 AM HKT+1 day).

And with that, I will sign off for the year. I wish you and your loved ones a very happy and healthy 2026. We will be back on Friday, January 2 with our MacroQuant Model Update.

The odds have risen that we have reached a “Metaverse Moment” – a situation where investors punish AI companies for increasing capex. This warrants greater caution towards AI stocks specifically, and the broader S&P 500 more generally.

The AI capex boom is having a measurable impact on the economy but, so far, it is more muted than often cited.

While it is impossible to know exactly when global equities will peak, there are now enough vulnerabilities to justify keeping one’s finger near the eject button.

The AI boom has had less of an impact on the economy than widely believed. This may eventually change, but the risk is that investors grow impatient before it does.