Here\u2019s a statement that will either age like fine wine or like milk left on a summer porch: the chief investment officer of one of Europe\u2019s largest asset managers says the AI trade is not a bubble.<\/p>\n
Johanna Kyrklund, Group CIO at Schroders, has laid out a case that today\u2019s tech and AI valuations, while admittedly frothy, lack the defining characteristics of a true speculative mania. The core argument is straightforward. Unlike the dot-com era, the companies at the center of the AI boom are actually making money.<\/p>\n
Cash flows make the difference<\/p>\n
But Kyrklund\u2019s analysis points to a fundamental distinction. The major tech firms driving AI spending today, think Meta and Google, are funding their enormous capital expenditures through robust operating cash flows, not through venture capital fairy dust and creative accounting.<\/p>\n
Both Meta and Google have already begun reporting early revenue gains directly tied to AI features baked into their products. That\u2019s a crucial difference from 1999, when companies with zero revenue and a website were commanding billion-dollar valuations because they had \u201c.com\u201d in the name.<\/p>\n
The bubble question won\u2019t go away<\/p>\n
Still, Kyrklund\u2019s view isn\u2019t universally shared, even among professional money managers. Surveys conducted by Bank of America in late 2025 found that over 50% of fund managers expressed concerns about an AI bubble forming in markets.<\/p>\n
The equity concentration problem adds another layer of unease. Major S&P 500 tech firms now hold a substantial share of total market weight, creating a dynamic where a handful of companies effectively dictate the direction of the entire index.<\/p>\n
Schroders\u2019 2026 outlook doesn\u2019t dismiss bubble risk entirely. Instead, it frames the situation as a fork in the road. One path leads to continued AI-driven productivity growth, with companies successfully monetizing their investments. The other path leads somewhere considerably less pleasant.<\/p>\n
Specifically, Schroders has flagged Q3 2026 as a potential inflection point. If AI growth expectations aren\u2019t met by then, the firm warns, markets could experience what amounts to an \u201cAI bust\u201d scenario.<\/p>\n
What investors should actually do with this<\/p>\n
Schroders\u2019 answer is diversification and active management. The firm advocates for a proactive approach that monitors actual returns on AI investment rather than getting swept up in narrative momentum.<\/p>\n
Kyrklund\u2019s position is that the fundamentals currently support the valuations, but that support is conditional. It depends on companies continuing to translate AI spending into actual revenue growth. Today, there are real metrics, real cash flows, and real revenue figures that investors can track quarter by quarter.<\/p>\n
Kyrklund\u2019s Q3 2026 timeline gives the market roughly a year to prove the thesis. If AI revenue growth accelerates and capital expenditures start generating measurable returns, the \u201cnot a bubble\u201d camp will look prescient. If those returns disappoint, a fund manager survey showing over 50% bubble concern will look like the understatement of the decade.<\/p>\n