Creeping fears about the likelihood of an implosion in artificial intelligence (AI) and technology stocks are feeding into institutions’ overall concern for market performance next year.
Research from Natixis Investment Managers covering 515 institutional investors who collectively manage USD29.9 trillion globally in assets, finds 43 per cent believe the possibility of a tech bubble is the number one threat, second only to geopolitics (49 per cent).
Almost three-quarters (74 per cent) of investors predict a market correction in 2026, with two-thirds noting that slow growth may be a harbinger of recession, which they rank as one of their top three economic threats.
AI and technology were pivotal to the success of 2025 market performance, with most indexes posting a third consecutive year of double-digit returns despite tariffs, geopolitical conflicts and supply chain shocks.
Over the past decade, the Magnificent 7 stocks – Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia and Tesla – have dramatically outperformed, delivering compound annual returns of 38.7 per cent in GBP terms since 2015.
This far exceeds the S&P 500’s 16.5 per cent and dwarfs the FTSE 100 index, which returned just 8.3 per cent annually.
David Aujla, Multi-Asset Fund Manager at Invesco, says: “This exceptional performance [from the Magnificent 7] has sparked frequent client discussions around the sustainability of the AI-driven rally. Is the surge in US technology stocks fundamentally justified, or does it increasingly resemble a classic bubble? While some areas of the AI space may exhibit signs of froth, suggesting potential consolidation ahead, we see important distinctions between today’s tech rally and previous market bubbles”
Forty-six per cent of the institutions surveyed by Natixis worry that AI is a bubble, climbing to 60 per cent in the UK. Moe than a third (35 per cent) anticipate that the bubble will burst in 2026, while 69 per cent believe significant new AI tech developments will bring concentration risk to the forefront of equity markets and 64 per cent worry that a slowdown in Capex spending has the potential to upend market growth.
Aujla says Invesco will maintain exposure to technology stocks but “remains focused on ensuring that overall returns are not overly reliant on the fortunes of this single segment of the market”.
This week chip giant Nvidia’s stronger-than-expected revenues have helped allay some investor fears.
The company said revenue for the three months to October jumped 62 per cent to USD57 billion, driven by demand for its chips used in AI data centres. Sales from that division rose 66 per cent to more than USD51 billion.
Ben Barringer, head of technology research at Quilter Cheviot, says: “Nvidia’s results shows the company continues to walk the walk when it comes to the artificial intelligence story, and it has proven to talk a good game too, rebutting many of the accusations around an overhyped investment market. Firstly, its results backed up what has already been a stellar past couple of years, beating expectations comfortably and revenues accelerating going forward.”
Barringer notes this is “just what the market wanted” after a nervous couple of weeks.
“Given so much hinged on this latest set of results, and given the success of them, investment markets may just see a Santa rally in December after all.”
