Alarm Bells for Tech Stocks — Behind the AI Frenzy, Bubble Fears Are Growing. Is 2026 a Make-or-Break Year?

Market watchers may have noticed that beyond geopolitical uncertainties, another potential time bomb is hanging over markets this year: the risk of an AI bubble bursting. Looking back at last year, the AI boom was nothing short of explosive. Technology giants poured trillions of dollars into AI chips, data centers, and related infrastructure, racing to dominate the AI landscape. However, beneath the excitement lies a harsh reality: actual revenues generated from AI remain far below the massive investments made. This “burning cash without meaningful returns” model has increasingly tested investor patience. Capital is not unlimited, and few investors are willing to keep paying for promises that have yet to translate into profits. Some analysts have been blunt in their assessment: 2026 could be the ultimate stress test for the AI industry. If heavily funded AI projects fail to deliver commercially viable products and establish sustainable profit models this year, a wave of disappointment-driven sell-offs could follow. Such a scenario would not only hurt technology stocks but could also drag down the broader equity market. This is especially relevant for investors focused on Malaysia’s market. In an interconnected global financial system, no market is truly insulated. A cooling of the global AI boom could easily spill over into Malaysian equities through negative sentiment and capital flows. As a result, the key factor to watch in tech investing this year is clear: AI’s ability to monetize. Whether the industry can transition from aggressive cash-burning to consistent, sustainable profitability will largely determine the future direction of technology stocks — and, ultimately, investors’ returns.