AllianceBernstein's CEO says you should be worried about an AI bubble

William Edwards Sat, June 27, 2026 at 1:37 PM UTC

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Taurat Hossain for BI

In spite of the hype around artificial intelligence, not all executives are all that enamored by the hottest technology since the internet.

A recent NBER study showed that about 90% of 6,000 C-Suite professionals report that AI has had "no impact on employment or productivity" over the last three years.Data from Deloitte shows that only 10% of executives are currently seeing a return on their AI investment, and many think it will be at least a few years before it pays off.

Seth Bernstein's outlook is a bit different. In fact, it's hard to overstate how impressed the AllianceBernstein CEO is with AI.

It is among the society-changing technologies throughout history, he says, placing its eventual impact above that of the internet and about on par with the invention of the printing press in the 1400s.

"Literacy expanded from 0.11% of the population to 20% to 40% to 80%," Bernstein said during an interview with Business Insider earlier this month. "That democratization of information changed the speed, the rate of change in the world. It changed power dynamics and relationships. It changed everything we know, right? I think AI's impact is on that kind of scale."

Taurat Hossain for BI

Bernstein himself uses the technology to summarize investment research and conduct performance reviews, and he says it has accelerated the firm's investment committee's ability to aggregate and analyze information when building portfolios. And these use cases will only grow, he said.

"AI will spark really profound change in the way we both manage money, how we service clients, how we engage with our own people," he said.

But believing in a technology's ability to change the world and believing in it as an investment are different things.

AI stocks like chip makers and the "hyperscalers" that include Microsoft, Amazon, and Alphabet, have seen massive gains over the last few years. Some valuation measures remain at historically high levels, suggesting investors could already be pricing in future earnings gains from the technology.

When expectations are as lofty as they are now, there's little room for things to go wrong, and history shows that investors can end up paying a hefty price in terms of market declines.

That worries Bernstein.

"Why wouldn't you worry about it?" he said of a potential AI bubble.

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A coming correction?

Bernstein said there are "some real parallels" between today and the dot-com bubble of the late 1990s.

Perhaps case in point is SpaceX's IPO earlier this month, which briefly grew to the fifth-largest company in the world by market cap despite not yet being profitable.

There's also froth at the index level. One popular S&P 500 valuation measure — the Shiller CAPE ratio, short for cyclically-adjusted price-to-earnings ratio — is near all-time highs on the heels of the AI boom. The metric compares current stock prices to a rolling 10-year average of earnings.

"Valuing it is always an art more than a science when you have something that's unproven," he said.

Market concentration is also extremely high, both in terms of AI stocks' market capitalization relative to the rest of the market, and in terms of US stocks' market cap compared to the rest of the world.

The top 10 stocks in the S&P 500 make up about 40% of the index, while US stocks make up 72% of the MSCI World Index. Any private market exposure is likely to be based in the US as well, he said. Together, that makes investors vulnerable to any change in sentiment on the AI trade.

There are external factors that can put a highly valued market at risk, too — chief among them being inflation, arguably the market's biggest boogeyman right now. As of May, consumer prices were up 4.2% year-over-year, well above the Fed's 2% target.

Tariffs, ongoing government spending, and elevated oil prices could continue to push up inflation, Bernstein said.

With the above risks in mind, Bernstein said a potential market correction is at the forefront of his conversations with clients, and that he expects a pullback at some point.

"Is it likely we have a meaningful correction? I think it is," he said. "Can I tell you when it's going to happen? No. And it could take a long time."

To help defend against such a scenario, Bernstein said he's trying to get his clients to gradually move money outside the country — something that Americans have generally been loath to do.

"For the last 15 years, they've been more or less right to do that. You've made much more money here," Bernstein said. "That's not always been true, and it probably won't be true in the future."

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