"Expectations are too high": strategist Charles Schwab named the main risk of the AI boom

Investors' expectations of artificial intelligence are at such a high level that the entire economy could suffer if they are disappointed, Charles Schwab Chief Investment Strategist Liz Ann Saunders warned in an interview with Business Insider. Nevertheless, she said, the AI frenzy is not in danger of becoming a second dot-com bubble - the current boom is radically different from the situation in the early 2000s.

According to Saunders, the main risk of today's AI boom is not related to fundamentals, but to investors' excessive expectations. "The bar of expectations has been raised too high," she said. In such a situation, even a slight deviation from forecasts could trigger a "more aggressive" sell-off.

The situation is all the more dangerous because a huge portion of investors' capital is concentrated in the shares of major Big Tech companies, making the economy particularly sensitive to stock market fluctuations. According to Saunders, if a bear market occurs, it "could set off a chain reaction in the economy" because investors, spooked by losses in their portfolios, would start cutting back on their consumer spending, which would slow the economy's growth.

Saunders says speculation in niche segments - such as meme stocks, drones and quantum computing - is less of a concern for her. "There may be cracks in that armor," the analyst says, "but it won't cause the entire stock market to collapse. She adds that the recent rise in gold prices to a record $4,000 an ounce is "an area where the pendulum of enthusiasm may have swung too far," but that rally has been driven more by fears of foregone gains than by fundamentals.

The hype around AI and the circular deals within the sector are reminiscent of the atmosphere of the late 1990s, Saunders admits. But she sees the main difference from the dotcom period in the scale and stability of the companies that set the tone in the market. Whereas in the early 2000s loss-making startups led the way, today it's large technology corporations with strong balance sheets and growing revenues. For example, Nvidia was the first in the world to reach a capitalization of $5 trillion, but this assessment is backed up by financial indicators: the chipmaker's revenue for the second quarter was $47 billion and net income was $26 billion.

Headlines scream AI bubble, analysts argue overheating - in the fall of 2025, the artificial intelligence market has become Wall Street's main nerve.

Companies related to artificial intelligence have providedabout 80% of the growth in the capitalization of the U.S. stock market this year. UBS estimates global spending on artificial intelligence at $375 billion in 2025 and $500 billion in 2026. M7's total market capitalization has surpassed $22 trillion and now represents 37.4% of the S&P 500 index.

Experts agree that the situation is heating up: analysts at Bank of America call trading in shares of AI companies "overheated" and have even singled out the "AI bubble" as one of the main global risks. James Dimon, head of JPMorgan Chase , estimates the probability of a serious market correction in the next two years at 30%. The IMF talks about similar risks, comparing the current multiples with the levels of the dotcom era.

However, there is an opposing viewpoint. BlackRock CEO Larry Fink believes that investments in artificial intelligence reflect structural demand and technological transformation of the economy rather than speculation. Nvidia CEO Jensen Huang agrees that the current growth is due to a steady demand for computing power, not market excitement.

According to formal signs, the AI market has already moved into the stage of a mature bubble. Extreme valuations, record concentration of capital in the "magnificent seven", the gap between investments and real profits, and the growth of speculative activity point to overheating.

Analysts agree that 2025-2026 will be a test of the strength of the AI market and will show whether companies will be able to confirm their revenue and profitability forecasts and retain investors. At the same time, Ray Dalio believes that the AI bubble is unlikely to burst on its own: it will need a catalyst - a tightening of the Federal Reserve's policy or an external economic shock.

This article was AI-translated and verified by a human editor