Mohamed El-Erian cautions that the AI sector may have entered a ‘rational bubble’ driven by widespread overinvestment and companies attaching AI labels to operations to attract capital. He warns that minor ‘accidents’ within overvalued entities could cascade into a broader market sell-off, undermining current valuation levels.

Nvidia has solidified its position at the epicenter of this bubble by capturing approximately 92% of global GPU revenues. This dominance underscores the company’s critical role in AI infrastructure but also concentrates market risk heavily on its performance.

Tech giants issued $120 billion in bonds last year to finance expansion under loose credit conditions. Analyst projections indicate a significant correction could erase nearly $20 trillion in shareholder wealth, highlighting the systemic risk of overvalued AI investments.