AI Bubble: Bursting in 2026?

Experts at the FT Money roundtable suggest the AI boom may be unsustainable, potentially leading to a market correction in 2026. The rapid growth of the AI sector, fuelled by massive capital expenditure, accounted for a significant portion of economic growth in 2025. However, concerns are rising about the ability of AI companies to generate sufficient returns to justify their high valuations as competition intensifies.

Specifically, the focus is shifting from investment to profitability, with doubts emerging about whether companies can effectively monetise AI. Factors contributing to this include the rise of more efficient AI models that reduce reliance on expensive hardware and growing competition driving down prices and returns. The potential bursting of the AI bubble could have significant consequences for stock markets, interest rates, and the dollar.

Despite these concerns, AI's transformative impact on industries and economies remains undeniable. The focus in 2026 is expected to shift towards mastering large-scale AI integration and addressing challenges such as governance, ethical usage, workforce adaptation, and regulatory compliance.