AI Bubble: Bursting in 2026?

What happened

FT Money roundtable experts forecast a potential AI market correction in 2026, citing unsustainable growth fuelled by significant 2025 capital expenditure. The sector now faces scrutiny over profitability, with doubts regarding companies' ability to justify high valuations amidst intensifying competition. This shift is driven by the emergence of more efficient AI models, reducing reliance on costly hardware, and increased competition, which collectively depress prices and returns. The anticipated correction could impact stock markets, interest rates, and the dollar.

Why it matters

The anticipated market correction introduces a significant financial constraint on AI-driven initiatives, increasing due diligence requirements for procurement and finance teams regarding technology investments and vendor viability. The shift towards profitability and efficient models weakens the justification for high capital expenditure on proprietary hardware, placing an oversight burden on operational and strategic planning for AI integration. This also elevates exposure for compliance and HR departments to evolving governance, ethical, and workforce adaptation challenges as the sector matures.