"The pin that will burst the bubble": investors name the underestimated risk in 2026

Global stock markets, which have reached record highs amid the hype surrounding artificial intelligence, could face a reversal in 2026 due to accelerating inflation, Reuters reports, citing market participants surveyed. Investors warn that the AI boom and large-scale government support measures could increase price pressure and change the conditions for further market growth.

US stock indices, where the seven largest technology companies (the "Magnificent Seven") accounted for about half of the market's total profits in 2025, showed double-digit growth over the past year and reached historic highs. Enthusiasm surrounding AI and expectations of monetary policy easing also pushed European and Asian stocks to record highs. New waves of government stimulus in the US, Europe, and Japan, as well as the AI boom, are expected to spur global economic growth in 2026, Reuters reports.

However, the agency notes that all this is forcing asset managers to prepare for a renewed acceleration in inflation, which should prompt central banks to end their rate-cutting cycles, sharply curbing the flow of "easy money" into AI-obsessed markets.

"We need a pin to pop the bubble, and most likely this will happen through tighter monetary policy," Trevor Grithem, head of multi-asset strategies at Royal London Asset Management, suggested in a comment to Reuters. And although he continues to hold shares in the largest technology companies, Reuters notes, he would not be surprised if inflation began to rise rapidly around the world by the end of 2026.

The multitrillion-dollar race among so-called hyperscalers — companies such as Microsoft, Meta, and Alphabet — to build new data centers, due to the rate at which they consume electricity and require the development of advanced chips, is also an inflationary factor, asset managers note. "In our forecasts, costs are rising, not falling, as we see inflation in both chip costs and electricity prices," said Morgan Stanley strategist Andrew Sheets.

According to him, consumer price inflation in the US will remain above the Federal Reserve's 2% target at least until the end of 2027, partly due to large-scale corporate investment in AI.

J.P. Morgan's head of cross-asset strategy, Fabio Bassi, said that improvements in the US labor market, fiscal stimulus, and interest rate cuts would keep inflation above this target "regardless of chip prices."

According to Gritem of Royal London Asset Management, a possible tightening of monetary policy will reduce investor appetite for speculative technology assets, increase the cost of financing AI projects, and lead to lower profits and, as a result, lower stock prices for technology companies.

Similar concerns are reflected in Aviva Investors' forecast for 2026. The company notes that one of the key risks for markets could be the end of the cycle of rate cuts by central banks around the world, or even a shift to rate hikes.

"What keeps us awake at night is the return of inflationary risks," said Julius Bendikas, head of European economics and dynamic asset allocation at Mercer, which directly manages $683 billion in assets and advises institutional investors with a combined $16.2 trillion in assets under management, according to Reuters. At the same time, he is not yet betting on a stock market correction, but is gradually reducing positions in debt markets, which could be hit hard in the event of an inflation shock, the agency notes.

"It is inflation that could start to scare investors and cause cracks to appear in the markets," said Kevin Toze, a member of the investment committee and portfolio manager at Carmignac. According to him, against the backdrop of an accelerating economic growth cycle, "inflation risks remain greatly underestimated," writes Reuters. This prompted Toze to increase his investments in US Treasury bonds, which are protected against inflation, the agency notes. He also noted that as the risks of rate hikes increase, the price-to-earnings ratio that investors use to analyze large AI-related companies will decline.

Rising costs and consumer price inflation could also affect investor behavior in general, according to George Chen, a partner at consulting firm Asia Group who previously held a senior position at Meta. A sharp rise in costs will increase the price of AI projects and force investors to reconsider their desire to bet on AI, he suggests.

"Inflation in the cost of memory chips will lead to higher prices for AI companies, reduce returns for investors, and ultimately reduce the flow of funds into this sector," Chen said.

Markets are already showing early signs of nervousness due to rising costs and potentially excessive spending on AI, Reuters notes.

Oracle shares fell sharply in December 2025 after the company reported a significant increase in expenses. Shares of another major US company, Broadcom, declined amid investor concerns about a possible squeeze on its margins. Personal computer maker HP also expects to face pressure on prices and profits in the second half of 2026 due to rising memory chip costs caused by increased demand from data centers, Reuters reports.

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