The AI capital-spending boom looks historic. Eleven other booms suggest a bust is inevitable.

By Steve Goldstein

This time won't be different, say strategists at Raymond James.

How long will the artificial-intelligence mania run?

That's the key question gripping markets, and strategists at Raymond James, led by Tavis McCourt, said the artificial intelligence capital-spending boom is on par with the biggest over the last 150 years.

They looked at 11 other booms, including the buildout of U.S. railroads, World War II mobilization and the Japan asset bubble, to get a sense of how long this one will run.

So far, it's run quite far: in just 2026, the Nasdaq 100 QQQ has jumped 19%, as memory-chip makers like Micron Technology (MU) enjoy the gains that Nvidia (NVDA) once experienced when it led the AI boom.

The Raymond James strategists say these booms follow the same basic curve: a technology innovation, followed by evidence of how profitable the boom could be, which in turn leads to more concentrated portfolios. Then an exogenous shock to the system happens and access to capital closes as stock prices fall and credit spreads widen.

"Booms tend to drive overall economies with long term treasury yields increasing, inflation accelerating, equities rising, and credit spreads tightening during all capital spending booms, and all reversing (sometimes dramatically) when the capital spending starts declining," they say.

Busts occur when capital spending starts declining - which could be from rising financing costs, overcapacity, asset price reflexivity, cash-flow delays or any combination.

Their expectation is that AI will meet the same fate as past capex booms. "It's hard to find any example of a capital spending boom as large, fast, narrow, and privately funded, as AI spending has been, that hasn't ended in a bust period historically. The question is timing and catalyst for the boom turning into a bust," they say.

Historically, downturns then extend to the broader economy, creating a recession, which eventually leads to equities and credit bottoming. That said, capital booms continue after two to five years of capital-spending declines.

"Of note, capital spending busts do not mean the capital spending was worthless. All of these capital spending booms we looked at were incredibly helpful to the economy when looking at the economy over a time frame of decades, even if the bust causes recession or depression initially. Whether the capital spending boom will be beneficial to equity/credit is separate from if the capital spending boom is helpful to the economy long-term," they say.

-Steve Goldstein

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-27-26 1041ET