AI is following the same script as past ill-fated booms: BCA
Investing.com -- Artificial intelligence is tracing the same arc as previous investment manias that ultimately unraveled, according to BCA Research, which warned that the current boom could fade within a year.
In a new report, authored by Peter Berezin, BCA’s chief global strategist, BCA Research said its study of historical capital-expenditure surges shows “AI is following the same script as those ill-fated booms.”
The firm examined the railway expansions of the 19th century, the 1920s electrification wave, the late-1990s internet bubble and several oil-sector upswings.
BCA Research highlighted five recurring patterns. “Lesson #1: Investors failed to appreciate the S-shaped nature of technological adoption.”
That pattern, it said, often led to unrealistic expectations about the speed at which new technologies would scale.
A second theme was overly optimistic revenue assumptions. “Lesson #2: Revenue forecasts underestimated the degree to which prices would fall.”
BCA Research noted that this mismatch contributed to later declines in profitability across past booms.
Financing patterns also echoed earlier periods of overextension. “Lesson #3: Debt became an increasingly important source of financing.”
According to the report, cheap capital typically amplified risk when growth slowed.
Additionally, “Lesson #4: Asset prices peaked before investment declined,” a sequence BCA Research described as characteristic of speculative cycles.
Finally, “Lesson #5: The capex busts weighed on the economy, which, in turn, further hurt asset prices.”
BCA Research believes these historical parallels suggest the current AI cycle may be nearing its peak.
“We expect the AI boom to end within the next 6 to 12 months,” the firm wrote. It added that analysts are watching for a “Metaverse Moment” that would signal when to “turn maximally defensive on stocks.”
