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Investment Strategy Dec 16, 2025

What could end the AI boom?

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Artificial intelligence (AI) has triggered a historic U.S. investment boom. Levels of investment in AI have almost reached historically unprecedented levels and show few signs of slowing.

Our 2026 Outlook: Promise and Pressure assesses how to evaluate an AI bubble. This piece evaluates which forces driving this boom may also hold the key to understanding its limits and hold the potential to reverse investor optimism.

We dive into the AI boom’s potential limitations, including:

  • Financing limits: Funding remains ample—particularly for the largest platforms—but early signs of revenue pressure and questions about debt loads have begun to arise for a small number of companies within the AI ecosystem. How could these play out, and what metrics are we using to monitor the leading firms?
  • Physical infrastructure limitations: Energy supply and grid capacity are becoming crucial factors, increasingly adding friction, and potentially slowing the pace of the AI ecosystem’s expansion. Data center growth is running up against genuine bottlenecks, both in generation and transmission. Meanwhile, a shortage of skilled labor could delay the next wave of expansion. Where do we see this going?
  • Public sentiment and social impacts: Voters have expressed anxieties about higher electricity prices tied to data centers. Public sentiment toward big tech has cooled. Local pushback has already derailed some data center projects, suggesting a shift may be underway, at least among some local constituencies. How serious are the signs of anxiety over AI’s impact on jobs and, by extension, inequality? We examine these social and political pressures, how they may begin to influence political campaigns, and the possible knock-on effects on market dynamics.
  • Valuations: Certainly, tech sector valuations are elevated, but today’s levels are not wildly unrealistic. The real risk may lie in their sensitivity to changes in interest rates. Earnings growth is another important question.

We examine the specific market signals that could reveal when optimism may give way to investor caution.

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