Big Tech stocks have experienced a noticeable decline amid growing concerns that a peak may have been reached, prompting speculation about an impending correction in the surging AI sector. Investors are particularly vigilant regarding the significant levels of borrowing among AI companies, which could exacerbate the consequences of a potential market bubble burst.
Julian Emanuel, chief equity strategist at Evercore ISI, expressed his views on this developing situation during an interview with Bloomberg TV. While maintaining a bullish outlook on the AI sector, he acknowledged the parallels being drawn between today’s AI investments and the tumultuous dot-com bubble of the late 1990s. Emanuel emphasized the risks associated with the current high levels of corporate debt, noting, “When you think about the late 1990s, the problem with the bursting of the bubble… was the fact that a lot of the build-out was financed by companies that were incurring debt and had no revenues on the other side.”
He pointed out a concerning trend: as debt issuance accelerates, tech firms are racing to scale operations quickly, creating a potential risk of unsustainable growth. This activity has raised alarms among investors, particularly as leading tech companies—such as Amazon, Meta, and Oracle—are actively tapping into the debt markets for financing in 2025. The environmental mixture of hefty borrowing coupled with uncertainty surrounding revenue yields raises questions about the sector’s resilience, should AI growth slow down or its revenue streams take longer than anticipated to materialize.
Moreover, these companies no longer enjoy the cushion of historically low interest rates, which could further complicate their financial stability if the momentum of the AI market stalls. Historically, Emanuel has been adept at identifying market bubbles, having notably labeled the bull market in government bonds in 2019 as the “greatest bubble ever,” warning of potential significant losses for investors.
Just a few months ago, with markets eyeing the Q2 earnings season, he cautioned that investors appeared overly optimistic, forecasting a potential market correction of up to 15%. Despite his caution regarding the debt trends in the AI realm, Emanuel remains optimistic about investment opportunities, advising that investors willing to assume some risk may find value. “From a valuation perspective, as much angst as there is in comparison to the late 1990s, these names are… not cheap. But they’re certainly not expensive relative to their own history,” he concluded.
