"While markets eventually posted a strong year, 2025 was not consistently a smooth ride for investors. In addition to market dips generated by the Trump administration's tariff rollout, stocks were particularly sensitive to any warning signs from the AI camp. In August, the tech-heavy Nasdaq index fell 1.4% in a single morning after OpenAI CEO Sam Altman himself admitted an AI bubble was a possibility, and that investors as a whole might be "overexcited about AI.""
"Much of the concern about an AI bubble has been focused on the technology's rate of adoption, with one MIT study last year finding 95% of generative AI pilots at companies had so far failed to turn a profit. In a November interview with CNBC, Dalio did not deny the potentially transformative effects of AI, but maintained the currently soaring valuations of tech darlings could face a correction before companies figure out how to fully integrate AI."
U.S. equities surged in 2025, with the S&P 500 rising 16% and technology stocks powering much of that gain on AI optimism. Valuations in AI-related firms have reached frothy levels that increase vulnerability to a correction in 2026. Markets showed sensitivity to negative AI signals, including a sharp Nasdaq drop after a leading AI CEO acknowledged a possible bubble. A study found 95% of generative AI pilots so far failed to turn a profit, underscoring adoption and profitability challenges. Current tech valuations may need corrections before widespread, profitable AI integration. Federal Reserve policy uncertainty remains a major 2026 risk.
Read at Fortune
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