AI sector now checks all the classic bubble signs, says Rockefeller International's Ruchir Sharma

Summary

Ruchir Sharma argues that markets are right to ignore renewed U.S.-Iran tensions, as geopolitical events rarely have lasting impacts. He discusses why oil prices did not spike despite the supply shock, citing lower global energy dependence. The main focus is his warning that the AI sector now checks all classic bubble signs, but the bubble will keep inflating until the 10-year Treasury yield reaches 5% or the Fed is forced to act on inflation.

• Geopolitical conflicts typically cause only a brief market dip, and current tensions fit that pattern.
• Oil's muted reaction stems from a less energy-dependent world economy, alternative supply routes, and demand destruction in Asia.
• The AI sector meets classic bubble criteria: overinvestment, overleverage, overownership, and overtrading.
• Bubbles do not end on their own; higher interest rates are historically the trigger.
• Semiconductor stocks have already seen parabolic price action, a late-stage bubble hallmark.
• A 10-year Treasury yield of 5% or a Fed inflation confrontation would be needed to pop the AI bubble.