University of Kwazulu-Natal

Ai Trends 2026 The Bubble Bursts Value Remains Damovo

Bonisiwe Shabane
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ai trends 2026 the bubble bursts value remains damovo

An AI tech bubble is like having a balloon and pumping it with your mouth so it expands. The balloon is now bigger, but there is nothing except for air and a vacuum on the inside. Any cut on the surface would result in a burst. When investors raise alarms over the possible AI bubble burst risks, they refer to a similar scenario as our balloon. Arguments against an AI tech bubble revolve around the increasing enterprise AI adoption and applications in Generative AI, AI Copilots, and multimodal reasoning models. Critics of the AI tech market have conversely pointed out similarities to the dotcom bubble and call for caution about exaggerated spending and speculative analysis without real-world data backing.

The big question now is whether we are in an AI tech bubble or not. The outcome of the market in the coming years will give the perfect answer, but we can analyze possible AI overvaluation indicators today. We cannot discuss the AI hype vs reality market without reference to the dotcom bubble of the late 1990s. The special preference for internet-based companies over physical enterprises skyrocketed their prices even beyond actual earnings valuation. Investors became overly optimistic at the expense of critical analysis of results and financial fundamentals. This led to a bubble market between 1995 and 2000 as the Nasdaq stock index went from below 1000 to over 5000.

Surge in market value without any serious explanation backed by data. There was eventually a market crash when the Nasdaq brutally declined by 76.81% to a value of 1139 (from 5000) between March 2000 and October 2002. University Fellow in AI and Human Decision Making, University of Salford Assistant Professor of Economics, University of Leeds Richard Whittle receives funding from several standard sources including UKRI and Research England. No funders are likely to benefit from, or influence this work

Stuart Mills does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment. University of Salford and University of Leeds provide funding as founding partners of The Conversation UK. It is tech's biggest question, and there is a wide range of takes on every side. With artificial intelligence-driven spending leading to record deals and valuations, seemingly everyone is weighing in on the AI boom — and potential bust. Economic bubbles happen with a rapid rise in market values and asset prices in a specific area, often fueled by speculation, followed by a crash during which money is quickly taken out. More than 1,300 AI startups now have valuations of over $100 million, with 498 AI "unicorns," or companies with valuations of $1 billion or more, according to CB Insights.

Megacaps like Amazon, Meta, and Microsoft are spending billions on data center buildouts, and blockbuster deals are being announced left and right from OpenAI, Nvidia and others. AI's Reckoning: From Hype to Harsh Realities In a revealing glimpse into the future, the Platformer article forecasts a significant shift for AI in 2026. As the hype subsides, AI will transition from an innovation marvel to a measured utility under immense market and regulatory pressures. With major players like OpenAI and Google at the forefront, this landscape will be defined by demands for measurable ROI, stricter governance, and new market dynamics favoring those who integrate AI with real business...

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