{"id":9325,"date":"2026-06-26T16:54:51","date_gmt":"2026-06-26T16:54:51","guid":{"rendered":"https:\/\/www.fintechpulse8.com\/?p=9325"},"modified":"2026-06-26T16:54:51","modified_gmt":"2026-06-26T16:54:51","slug":"ai-boom-may-be-on-its-last-legs-but-will-first-surge-in-a-blow-off-phase-before-bubble-pops","status":"publish","type":"post","link":"https:\/\/www.fintechpulse8.com\/?p=9325","title":{"rendered":"AI boom may be on its last legs but will first surge in a ‘blow-off phase’ before bubble pops"},"content":{"rendered":"

<\/p>\n

The Nasdaq is headed for its worst weekly loss in more than a year, and the S&P 500 is on track for a fifth consecutive drop. <\/p>\n

\n

Similarly, after making history with the largest IPO ever, SpaceX stock has tumbled, and bonds it sold days ago are already sinking.<\/p>\n

It wasn\u2019t supposed to be like this. With the U.S. and Iran finally ending hostilities, the path looked clear for the AI boom to reach even greater heights as oil prices and bond yields fell.<\/p>\n

In fact, South Korea\u2019s high-flying Kospi stock index, which is dominated by AI darlings SK Hynix, and Samsung, set a new record just last week.<\/p>\n

Since then, it\u2019s crashed 10% and saw its fifth worst daily plunge on Tuesday, sparked by SK Hynix\u2019s comments that it planned to slow down its AI memory business. Global stock indexes followed.<\/p>\n

For analysts at Capital Economics, the volatility was especially worrisome, pointing out that such selloffs have previously only happened during bear markets like during the Asian financial crisis, the dot-com bubble, and the Great Financial Crisis.<\/p>\n

\u201cThis volatility is, in our view, evidence of excessive froth and calls into the question the sustainability of this rally,\u201d James Reilly, senior markets economist, wrote.<\/p>\n

The fact that stocks around the world tumbled because of news from one Korean firm highlights how important semiconductors stocks have become, he added.<\/p>\n

Indeed, chips \u201chave been the only game in town,\u201d with their returns far outstripping even those of other AI-related stocks.<\/p>\n

\u201cIf the new market leaders, semiconductor firms, also start to struggle, the stock market would be in big trouble,\u201d Reilly said.<\/p>\n

Strong earnings and guidance from chipmaker Micron on Wednesday appeared to put doubts about the AI rally at ease. But even that wasn\u2019t enough.<\/p>\n

Apple\u2019s price hikes due to chip shortages and a report OpenAI may delay its IPO to 2027 put stocks in a tailspin again. Expectations the Federal Reserve will hike rates soon haven\u2019t helped either.<\/p>\n

\u201cThe AI rally may be approaching its final stages,\u201d Capital Economics declared in a follow-up note on Thursday, adding that the \u201cequity bubble close to bursting.\u201d<\/p>\n

While robust earnings have sustained the AI boom\u2014unlike the dot-com bubble that saw unprofitable startups soar\u2014investors\u2019 expectations for future earnings are getting unrealistic, it warned.<\/p>\n

For now, a \u201cblow-off phase\u201d should deliver more upside before the party is finally over. Capital Economics predicted the S&P 500 would end 2026 at 8,250, up 12% from Friday\u2019s levels\u2014then collapse 21% to 6,500 by the end of 2027.<\/p>\n

Others on Wall Street see evidence elsewhere of a bubble, especially in the scramble to raise money via big equity and bond deals. <\/p>\n

Even before SpaceX\u2019s historic IPO, Google parent Alphabet netted nearly $85 billion proceeds earlier this month from a secondary stock offering. AI chip leader\u00a0Nvidia raised $25 billion in its first debt sale since the AI boom began.<\/p>\n

But SpaceX\u2019s $85.7 billion in IPO proceeds, followed days later by a $25 billion bond offering, is an example of \u201ca healthy boom, a stretched boom?.?.?.?into bubble territory,\u201d Ludovic Subran, chief investment officer at Allianz, said at an industry conference this week. <\/p>\n

\u201cThe guy just got $70 billion of funny money to play with to get us to space,\u201d he said, according to the Financial Times<\/em>. \u201cOf course, bond investors are not the same as equity investors. Equity investors, you can take them to Mars. Bond investors are, like, \u2018where is my coupon?\u2019\u201d<\/p>\n

Even a mostly bullish outlook from JPMorgan this week came with a \u201cflash crash\u201d warning. On Wednesday, analysts raised their year-end S&P 500 target to 7,800 from 7,600, citing strong earnings estimates.<\/p>\n

The forecast assumes the Fed holds rate steady this year, then raises next year, while the market\u2019s top gainers will remain highly concentrated in AI stocks.<\/p>\n

\u201cThat said, the path higher is likely to be non-linear given a tougher bar into 2Q earnings, crowded Momentum positioning (especially Low- Quality and Speculative Growth segments) that continues to face high probability of a flash-crash, rapidly increasing equity supply, and potentially tighter monetary policy that could constrain equity multiples,\u201d JPMorgan wrote.<\/p>\n<\/div>\n

#boom #legs #surge #blowoff #phase #bubble #pops<\/p>\n","protected":false},"excerpt":{"rendered":"

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