The AI Bubble: A Measured Assessment

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AI Illustration

The current enthusiasm for artificial intelligence, one observes, bears a striking resemblance to previous manias. The South Sea Bubble, the railway speculation… each had its moment. Early 2026 finds us, predictably, in a phase of consolidation, a slight cooling after the initial, almost hysterical, surge. A dip of ten percent in November, one gathers, caused barely a ripple of concern. The market, it seems, is remarkably adept at ignoring the inconvenient truth of valuation.

There remains, of course, the undeniable potential. We are, to employ a vulgarism, still in the early innings. But potential, as any student of history will tell you, is rarely realized in the manner anticipated. The sheer scale of investment, however, suggests a conviction that borders on the religious. Over a dozen exchange-traded funds now vie for the affections of investors eager to partake in the promised bounty. Most, upon closer inspection, prove to be remarkably similar, distinguished only by marketing hyperbole and marginally different fee structures.

The Global X Artificial Intelligence & Technology ETF (AIQ +3.32%), however, presents a marginally more considered approach. It is not, one suspects, entirely motivated by the desire to simply collect assets. Its portfolio construction, while hardly revolutionary, displays a degree of nuance that is, sadly, uncommon in this sector.

A Fund’s Modest Ambitions

This fund, in essence, invests in the ecosystem surrounding artificial intelligence. A rather broad remit, one might observe, but perhaps a sensible one. It seeks, according to its prospectus, to identify companies that might benefit from the development of AI, as well as those providing the necessary hardware. A perfectly reasonable, if somewhat vague, objective.

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What distinguishes this fund, if only slightly, is its attempt at diversification. While heavily weighted towards American technology companies – a predictable bias – it does allocate a meaningful portion of its assets elsewhere. Twenty-eight percent in non-tech, and a full third invested internationally. A prudent move, one imagines, should the prevailing winds shift and the megacap darlings fall from grace. It suggests a degree of skepticism, a recognition that even the most celebrated companies are not immune to the laws of economic gravity.

The Conditions for Sustained Optimism

There are, perhaps, grounds for cautious optimism. Two factors, in particular, might provide a further impetus to this sector.

1. The Specter of Lower Interest Rates

The market, with its customary foresight, is currently pricing in two cuts in interest rates. Whether these will materialize remains to be seen. The economic landscape is, as always, fraught with uncertainty. But should inflation remain subdued and the economy avoid a catastrophic downturn, lower rates could provide a further boost to this growth sector. A rather obvious observation, perhaps, but one worth stating nonetheless.

2. The Broadening of Capital Expenditure

The initial wave of AI spending was largely confined to the usual suspects – the technology giants with deep pockets and a penchant for innovation. For them, the investment translated into tangible results, fueling stock price appreciation. Now, however, capital expenditure is spreading beyond these behemoths, reaching into different corners of the ecosystem. Meta Platforms, one notes, has recently announced increased capex guidance. If these benefits begin to disseminate more widely, this fund’s more balanced portfolio should, in theory, outperform.

Overall, one approves of the Global X ETF’s reluctance to overemphasize the “Magnificent Seven.” Its willingness to invest internationally, while maintaining a large-cap tilt, suggests a focus on global leaders, not merely a handful of American giants. As the AI bubble – or, to be more charitable, the AI revolution – continues to unfold, this section of the industry may well be positioned to prosper. Though, one suspects, not without its share of turbulence.

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2026-02-09 11:42