Competition Could Be the Biggest Threat to the AI Tech Boom

Stocks are eyeing a rebound after Tuesday’s tech-driven selloff sparked by mounting concerns over AI spending — fears that even found their way into a recent Bank of England report. But is this the start of a bubble, or just another pause in a powerful rally?

Goldman Sachs strategists don’t see a bursting bubble just yet. In a note led by chief global equity strategist Peter Oppenheimer, they argue that today’s AI boom differs sharply from past speculative frenzies.

“Bubbles form when stock prices and valuations soar far beyond the future cash flows companies can realistically deliver,” Oppenheimer explained. “This time, much of the growth in leading tech names is grounded in strong fundamentals and real profit expansion — not hype.”

Goldman points out several distinctions from the dot-com era:

• Earnings are driving gains, not speculation.
• Tech leaders have strong balance sheets and steady cash flow.
• High valuations reflect global liquidity and long economic cycles, not just tech exuberance.

Still, the firm warns that competition could emerge as the biggest challenge to the AI narrative.

“The AI space is currently dominated by a few incumbents,” Goldman noted. “But every major innovation cycle invites new players — just as none of the S&P 500’s top 10 companies from 1985 stayed in the top 10 by 2020.”

That influx of competitors could reshape the sector, creating new winners while pressuring today’s leaders.

Goldman advises investors to stay diversified, as the benefits of the AI revolution are spreading across industries — from capital goods and energy to real estate and transport — all supported by Big Tech’s infrastructure buildout and rising global capex spending.

In short: while the AI boom isn’t a bubble yet, the real test will come when competition heats up and the market decides who the long-term winners truly are.