AI Investment Boom Risks Echoing 1997 Asian Financial Crisis, Strategist Warns

A major Wall Street strategist has drawn comparisons between the ongoing artificial intelligence investment surge and the economic bubble preceding the 1997 Asian financial crisis. Heavy corporate spending on AI technology and infrastructure has propelled the U.S. stock market to record highs, with the S&P 500 (SP:SPX) rising 0.59% to 7,812. However, research shows U.S. total factor productivity growth has continued to slow despite the massive capital deployment, mirroring inefficient capital allocation patterns seen in East Asia during the 1990s.

The disconnect between investment and efficiency stems from flat net business investment as a share of gross domestic product. While gross business spending on equipment and technology has grown, net investment after accounting for rapid equipment depreciation has remained largely unchanged. Because fast-evolving technology becomes obsolete quickly, companies must continually spend money replacing older hardware without necessarily building long-term economic efficiency or expanding productive capacity.

Investors should monitor whether future U.S. economic data begins to reflect genuine productivity gains from deployed AI tools, as technological benefits often take time to appear in official statistics. Additionally, global bond market pressures remain a key potential headwind for stock valuations. Borrowing costs across major economies like France, Japan, the United Kingdom, and the United States could come under renewed strain if investors start questioning whether elevated borrowing and spending levels are sustainable.