Emily Vartuhi
Warnings of an AI market bubble are growing louder. If valuations collapse, crypto could face amplified losses—though decentralized AI may emerge stronger in the aftermath.
Fund managers, experts, and institutions are increasingly warning of an artificial intelligence (AI) bubble. The Bank of England cautioned that the risk of a sharp market correction has increased, noting that equity valuations have been stretched for tech firms in the AI space. Goldman Sachs CEO David Solomon predicted a market drawdown in the next 12-24 months, and drew explicit parallels to the dotcom bubble. World Economic Forum President Børge Brende identified crypto, AI, and debt as three potential bubbles forming simultaneously. More recently, a Bank of America survey found 54 percent of fund managers believe AI stocks are in a bubble.
These warnings, coming from prominent financial institutions, go beyond theoretical grounds. They’re founded on a record degree of market concentration: extreme valuations in the AI sector. Nvidia recently made history by becoming the first firm to reach above a $5 trillion market valuation. Today, the chipmaker dominates 8.5 percent of the entire S&P 500, which is above the bottom 240 firms combined. The top five tech firms control 30 percent of the index, the highest concentration in 50 years. With AI-related firms responsible for 75 percent of all US stock market gains, the broader market’s performance is increasingly dependent on AI bets paying off. OpenAI lost $13.5 billion on $4.3 billion in revenue in the first half of 2025, yet is targeting a $1 trillion IPO. These are the types of numbers that have preceded painful corrections in the past.
Crypto’s Correlation and Vulnerability
From a crypto market perspective, this presents a true paradox. Crypto is vulnerable as an adjacent emerging technology sector that shares the same speculative capital and risk-on sentiment driving AI investments. Bitcoin’s correlation with the NASDAQ has been markedly strengthened, especially during times of AI uncertainty, which means that if tech investors hit the panic button, it’s probable that they will pull back across the board. Recall 2022, when rate increases and tech selloffs hit crypto even harder than stocks. If AI valuations collapse, it’s reasonable to expect crypto to suffer amplified losses as investors flee from anything speculative.
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