While excitement over artificial intelligence has sent stocks soaring to dizzying heights, seasoned investor Mark Mobius warns that this tech frenzy could trigger a brutal 40% market crash.
The current AI enthusiasm looks remarkably similar to the internet bubble of 1999. Back then, investors threw money at anything with “.com” in its name. Today, they’re doing the same thing with AI stocks, often without understanding what these companies actually do. Fear of missing out drives many investment decisions, creating a dangerous cycle of speculation.
A recent Yale survey reveals telling insights about corporate leadership sentiment. Forty percent of top CEOs believe AI investment has gotten out of hand and expect a market correction soon. However, sixty percent remain optimistic, creating a split that signals potential volatility ahead. When business leaders can’t agree on AI’s financial future, it raises red flags for investors. Similar to how B2B integration reduces operating costs by over 35% when properly implemented, strategic investments in established technologies often provide more reliable returns than speculative trends.
The numbers behind AI’s market dominance are staggering. These stocks have accounted for 75% of S&P 500 returns and a whopping 90% of capital spending growth since late 2022. AI-related investments even contributed 1.1% to U.S. economic growth in early 2025. While impressive, this concentration creates a house of cards effect where the entire market depends heavily on one sector’s performance.
The “Magnificent Seven” tech giants have shown massive earnings growth recently, but analysts expect this to level off by 2026. Meanwhile, a growing gap exists between these companies’ market values and their actual earnings. Think of it like paying premium prices for a burger that tastes just okay – eventually, customers notice the mismatch.
Historical patterns suggest tech manias typically end with severe price collapses that hurt investors badly. The rapid money flowing into AI stocks risks creating a bubble that could pop suddenly when speculative excitement fades. Adding to the concern, nearly two-thirds of U.S. deal value in the first half of 2025 went to AI and Machine Learning startups, representing a dramatic surge from just 23% in 2023.
Industry experts warn that the final surge in AI shares might signal the peak before a significant downturn. When the correction comes, it could trap late investors who jumped in during the last speculative push, making timing essential for protecting wealth.
