{"id":576897,"date":"2026-04-02T07:02:10","date_gmt":"2026-04-02T07:02:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/576897\/"},"modified":"2026-04-02T07:02:10","modified_gmt":"2026-04-02T07:02:10","slug":"congratulations-you-survived-the-bursting-of-the-ai-bubble","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/576897\/","title":{"rendered":"Congratulations, you survived the bursting of the AI bubble"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

The risk of a valuation bubble in AI has dwindled, writes Tim Shufelt.Xavier POPY\/Supplied<\/p>\n

While we\u2019ve been peering through our fingers at the mess in the Middle East, the financial markets have quietly turned against artificial intelligence.<\/p>\n

The Magnificent Seven stocks, which include the AI \u201chyperscalers\u201d spending hundreds of billions of dollars on data centres, are all down by double-digits from their 52-week highs, wiping out roughly US$5-trillion in market capitalization.<\/p>\n

Software stocks have been obliterated. But beyond that, the entire IT space, including the main beneficiaries of AI, has taken its lumps. U.S. tech sector valuations have sunk to the point that they are basically in line with the rest of the market. That hasn\u2019t been the case since the depths of the pandemic, nearly six years ago.<\/p>\n

So, where did the AI bubble go? If we\u2019re focusing on valuations as a measure of excessive investor enthusiasm, \u201cthen any such bubble in the S&P 500 has already burst,\u201d John Higgins, chief markets economist at Capital Economics, said in a note.<\/p>\n

Small businesses are increasingly using AI to vet and hire candidates<\/a><\/p>\n

Any decent stock bubble sees market valuations scale to scary heights. In a true speculative mania, when investors abandon all discipline, they become willing to buy a stock at ever greater multiples of a company\u2019s earnings.<\/p>\n

Back in the dot-com bubble of the late-1990s, for example, the tech-heavy Nasdaq 100 index sported a bloated price-to-earnings ratio of more than 60 at its peak. Though it never got anywhere close to that in the current cycle \u2013 it peaked at 32 last October \u2013 there has been a gnawing concern in recent months that some of the same dangerous forces were being stirred.<\/p>\n

Maybe investors can now scratch \u201cAI bubble\u201d off their long list of fears. Valuations have cratered. Over the last five months, the S&P 500\u2019s trading multiple is down from a peak of higher than 24 to roughly 20, which is right about where the 10-year average sits.<\/p>\n

But why? It doesn\u2019t really feel like we\u2019ve passed a major turning point in the AI trade. It\u2019s been more of a piecemeal turnabout that started with software stocks.<\/p>\n

Lots of traditional software providers suddenly found themselves facing an existential threat from AI tools that could let companies build cheap alternatives in house. <\/p>\n

U.S. software stocks collectively dropped by 30 per cent. The biggest casualty in Canada was Constellation Software Inc. CSU-T<\/a>, which has a massive roster of smaller software companies catering to niche industries. Its stock suffered a max drawdown of 56 per cent.<\/p>\n

But then investors got concerned that Big Tech was spending too much on AI. The top five hyperscalers have committed around US$700-billion in AI capital expenditures this year \u2013 double last year\u2019s already lofty total \u2013 in what is a quickly accelerating data-centre arms race. <\/p>\n

The conflict in the Middle East put new pressure on the tech sector. The disruption to the global oil supply from the closing of the Strait of Hormuz has awoken inflationary forces, which generally translate to higher interest rates. That\u2019s bad news for valuations in a growth-oriented sector like technology.<\/p>\n

Two of the biggest AI spenders \u2013 Microsoft Corp. MSFT-Q<\/a> and Meta Platforms Inc. META-Q<\/a> \u2013 have been hammered, their share prices down by 32 per cent and 27 per cent, respectively.<\/p>\n<\/p>\n

Hardware stocks have also joined in the downturn. Count Celestica Inc. CLS-T<\/a> among the losers in this category. As a supplier of data-centre equipment, Celestica was one of the top performers on the TSX last year, when its stock price tripled. Its shares are now down nearly 20 per cent, despite trouncing the Street\u2019s estimates in its most recent quarterly report.<\/p>\n

Even semiconductor companies supplying the engines that make AI run are trading at their lowest valuations in 3\u00bd years. Nvidia Corp., the poster child for the AI boom, now has a valuation of roughly half its level when ChatGPT was introduced.<\/p>\n

The risk of a valuation bubble in AI, which until very recently took up a lot of the oxygen in financial markets, has dwindled. <\/p>\n

However, there still could be a bubble in how much money the industry is expecting AI and chip companies to earn, \u201ceven if there isn\u2019t one in the price that investors are willing to pay for them,\u201d Mr. Higgins said. <\/p>\n

\u201cA pullback could occur if demand for AI turns out to be weaker than anticipated or if the Iran war drags on.\u201d<\/p>\n

There\u2019s always a catch. <\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: The risk of a valuation bubble in AI has dwindled, writes Tim Shufelt.Xavier…\n","protected":false},"author":2,"featured_media":576898,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[62,901,276,277,888,902,879,877,903,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-576897","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-alberta","tag-artificial-intelligence","tag-artificialintelligence","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/576897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=576897"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/576897\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/576898"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=576897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=576897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=576897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}