BCA Research Warns AI Bubble to Burst Within 6–12 Months
BCA Research’s November report “When Capex Booms Turn Into Busts” reviews four historical capital-spending bubbles—from 19th-century railroads to 1990s internet—and identifies five common collapse patterns. The firm finds that AI today mirrors these phases: S-curve adoption slowdown, revenue forecasts underestimating price drops, rising debt financing, asset prices peaking before investment falls, and mutual amplification of capex busts and economic recessions. Current signals include stagnating enterprise AI adoption, an over 99% drop in token pricing, surging corporate debt for data centers, and declining GPU rental costs. BCA Research predicts the AI bubble will end in the next 6 to 12 months. Recommended investment strategy: maintain a neutral equity stance over three months, underweight stocks over 12 months, and monitor forward indicators such as analyst capex forecasts, GPU leasing rates, and free cash flow. The report also warns of a potential recession worse than the 2001 dot-com crash if no new bubble emerges to offset the AI downturn.
Bearish
The report’s warning of an imminent AI bubble burst—evidenced by stagnant adoption, 99% token price drops, rising debt and falling GPU costs—suggests a downturn for AI-linked assets. Historical parallels to telecom, railroad, and dot-com busts imply heightened volatility and negative investor sentiment. In the short term, traders are likely to adopt defensive positions, reducing exposure to AI-focused equities and tokens. Over the medium to long term, persistent debt burdens and capex cuts may depress valuations further, reinforcing a bearish outlook until clear recovery signals emerge.