Rockefeller’s Ruchir Sharma Warns of Advanced AI Bubble Stages

This analysis is based on the December 15, 2025, CNBC ‘Squawk on the Street’ interview [1] with Ruchir Sharma, Chairman of Rockefeller International, who diagnoses the AI market as being in advanced bubble stages using his four ‘O’s’ framework: overinvestment, overvaluation, over-ownership, and over-leverage.

Overinvestment: Tech giants are projected to spend $400 billion on AI-related capital expenditures (capex) in 2025 [4], a rate comparable to the dot-com bubble era, per Sharma. Hyperscalers like Amazon, Alphabet, Meta, and Microsoft are increasingly questioning the sustainability of this spending due to power constraints and uncertain return on investment (ROI) [3].

Overvaluation: Major AI players exhibit elevated price-to-earnings (P/E) ratios, with NVIDIA at 43.86, Microsoft at 33.68, Alphabet at 30.47, and Meta at 28.60 [0]. AI-linked stocks have driven 75-80% of S&P 500 returns since late 2022 [2], indicating significant market froth, though current P/E ratios are not yet at the extreme 150+ levels seen during the dot-com bubble.

Over-ownership and Over-leverage: While detailed ownership concentration data is unavailable, the dominance of AI stocks in market returns suggests widespread ownership across institutional and retail investors. Over-leverage is a concern as much AI investment is funded by cheap capital, which could become scarce if interest rates rise [1].

Counterarguments exist, such as NVIDIA CEO Jensen Huang’s assertion of strong long-term AI demand [4], and global AI spending is forecast to grow at a 37% compound annual growth rate (CAGR) through 2030 [2].

• The AI market’s dual nature: short-term bubble signs coexist with long-term robust growth projections, creating divided Wall Street sentiment [4].
• AI’s economic significance: AI investments contributed approximately 1% to U.S. GDP growth in 2025 [2], meaning a bubble burst could have broader macroeconomic implications.
• Central bank policy dilemma: Raising interest rates to address bubble risks could trigger a burst in 2026 but may also harm overall economic growth [1].
• Hyperscaler scrutiny: Growing concerns about unsustainable AI spending by major tech firms could signal a shift toward more efficient investment practices [3].

Risks:

• A bubble burst could lead to a sharp correction in tech stocks, particularly AI-exposed companies, and a decline in the S&P 500 [1].
• Reduced AI spending could slow tech sector growth and negatively impact GDP [2].
• Central bank rate hikes to curb the bubble may have unintended economic consequences.

Opportunities:

• A market correction could create attractive entry points for long-term investors focused on AI’s structural growth potential [4].
• Increased scrutiny of AI spending could drive more efficient allocation of capital, enhancing long-term industry sustainability [3].
• The 37% CAGR AI spending forecast through 2030 indicates significant long-term market opportunities [2].

• Ruchir Sharma, a renowned economist and market veteran, uses the four ‘O’s’ framework to identify bubble stages in the AI market [1].
• AI growth is driven by generative AI advancements, cloud computing, and demand for AI infrastructure [4].
• Market indices (S&P 500 down 0.49%, NASDAQ down 0.82%, Dow Jones down 0.37%) and the tech sector (down 1.16%) showed weakness on December 15, 2025 [0].
• Information gaps include detailed data on AI stock ownership concentration, leverage levels for AI investments, and Sharma’s full application of the four ‘O’s’ framework [1].