Ed Yardeni: The AI Bubble Won't Burst, But Weak Companies Will Fade Away

Ed Yardeni, president of Yardeni Research, believes that the air is coming out of the artificial intelligence bubble, but the bubble itself is not bursting. According to him, bond investors are assessing borrowers from the AI sector more strictly and quickly than rating agencies, and he calls such discipline the healthiest outcome.

"I think the air is coming out of the bubble without the bubble bursting – that's the best solution to all these problems," Yardeni said on CNBC.

Over the weekend, Elon Musk warned that more than 200 cloud AI companies could shut down: creditors have largely stopped financing firms whose business is limited to AI data centers. Yardeni acknowledges that some companies will fail but expects stronger players to buy out the weaker ones. During the broadcast, shares of chip, memory, and cloud AI companies were rising.

On Monday, Anthropic filed a public registration for an initial public offering. Yardeni suggested that the funds raised could be directed to support a struggling AI cloud service provider, but the filing lists general corporate purposes and no commitments to significant acquisitions or investments.

Market Breadth and Credit

Ari Wald, head of technical analysis at Oppenheimer, also rules out a crash. He still expects a rally by the end of the year, citing oversold conditions, but warns that lower highs in small companies, market leadership, and credit could undermine this scenario and set the stage for a market reset in 2027.

The broadcast showed a chart with days when the S&P 500 fell by 1% or more, but more stocks rose than fell. Since 1990, there have been 13 such days, and seven of them occurred in 1999 and 2000.

Global credit spreads – the premium over safe securities that creditors demand – have risen to the highest level since May 2025. The Anthropic offering will test whether fresh capital will support weaker borrowers from the AI sector, as Yardeni expects. A rise in defaults would undermine his assessment.