AI Investment Boom Creates US Equity Market Bubble

The US equity market is currently exhibiting characteristics of a bubble driven by the artificial intelligence investment boom. This cycle is predicted to burst before the end of 2027, mirroring historical technology booms and busts such as the railroad and internet eras.

Nvidia and other picks and shovels suppliers face a projected peak in investment growth in 2026. This slowdown is expected to be triggered by resource constraints in chip manufacturing capacity, electrical generation, and construction, alongside limited cash flow among hyperscalers. As investment peaks, earnings for these suppliers are likely to falter, shifting market focus toward the actual returns on massive capital expenditures.

Further pressure on valuations stems from a challenging macroeconomic environment characterized by unsustainable federal debt and rising 30-year Treasury bond yields. An increase in the supply of equities through corporate insider sales and initial public offerings is also expected to weigh on the market. While AI is predicted to deliver long-term productivity gains, the current trajectory suggests an inevitable glut of overcapacity will trigger a rapid bust.