ruchir sharma

AI capex at 5% of GDP matches 2000 bubble levels; overvaluation, over-ownership (52% of US financial wealth in equities), and rising corporate debt issuance complete the four O's checklist. Every historical bubble bursts when interest rates rise, which will happen if AI-driven growth keeps inflation sticky.

After extreme US concentration (70% of MSCI) and dollar overvaluation, Europe, EMs and China have outperformed in 2025; Sharma sees this rotation persisting in 2026 as low expectations abroad meet reform impulses and China's pro-private-sector pivot.

Chinese models have achieved virtual convergence with US frontier models while spending ~$100B vs ~$500B in US capex, challenging the assumption that massive capital intensity is the only path to AI leadership.

Quality stocks (high ROE, low leverage) have suffered one of their worst relative performances on record, creating a rare entry point; Sharma expects the factor to revert as the AI bubble deflates and investors seek durable earnings.

The Fed has missed its 2% target for five years yet keeps cutting, a reaction function that socializes downside risk. Outside the US, UK, Japan and France are already confronting debt crises; the US is shielded only by AI optimism and tariff revenue.