One AI bubble has already burst. The next one-a 'rare' kind-is still growing, economist warns

Key Points:

• Tech sector valuations, particularly in information technology and Big Tech, have decreased since October 2025, with price-earnings ratios falling to their lowest since the pandemic, suggesting a possible end to the recent bubble.
• AI company valuations remain high, with 498 AI unicorns valued at $2.7 trillion as of fall 2025, but the tech sector has faced a downturn due to the "SaaSpocalypse," where investors fear AI replacing traditional software models, causing significant stock declines in SaaS firms like Salesforce and ServiceNow.
• Semiconductor industry growth has slowed due to chip shortages, geopolitical tensions, and supply chain disruptions, further impacting tech sector performance.
• A rare bubble may exist in the fundamental earnings of major tech firms, with extraordinary profit growth possibly unsustainable, raising concerns about a potential market correction if AI demand falters or economic conditions worsen.
• Risks to AI earnings include lower-than-expected demand, employee resistance to AI adoption, and economic instability from factors like the Iran war disrupting helium supplies critical for chip manufacturing and increasing operational costs.