This strategist says it’s a matter of when, not if, the AI bubble pops. Here’s how to prepare for that.

Artificial Intelligence has moved from niche innovation to mainstream investment line, attracting unprecedented capital flow and media attention. In a recent commentary on MarketWatch, Thomas S. Lombard—long‑time strategist at a major Swiss banking group—argued that the AI investment theme is safely on a trajectory toward a bubble, one that is inevitable to burst rather than something investors can forecast or influence. Lombard’s message was clear: “It’s a matter of when, not if, the AI bubble will pop.”

The core of Lombard’s argument lies in the rapid convergence of lofty expectations and the relatively modest financial returns observed so far. AI‑focused companies are providing valuations that outpace their current revenue streams, much of the growth being driven by optimistic forecasts that many analysts fear may ultimately be over‑inflated. Historically, sectors that have experienced sharp post‑adoption price surges—such as the dot‑com era and the recent semiconductor rally—have tended to produce bears as growth projections fail to materialise or as regulatory and supply constraints bite. The current AI narrative incorporates similar elements: a burst of enterprise enthusiasm, ease of entry into the market, and a sense of “once it’s done, it will change everything” that can skew analysis and earnings expectations.”

Lombard cautions against trying to time the eventual ‘corrective wave’ because forecasting market corrections is notoriously unreliable. Even well‑timed tactical asset‑allocation shifts in past bubbles have often missed by months or even obscured the opposing wind as markets re‑stabilised. Instead, he advises investors to shift their focus from timing the downturn to building portfolios that can withstand volatility. Robust risk-management practices—such as maintaining a diversified allocation across sector themes, preserving an appropriate cash buffer, and hedging against tech‑specific tail risks—are fundamental to preserving capital through potential sell‑offs.”

Beyond the mechanics of a potential crash, the broader economic stakes are significant. A sharp declination in AI‑theme stocks could reduce available capital for the next wave of technological development, create downward pressure on wages in burgeoning AI talent markets, and influence investor sentiment toward other growth sectors such as biotechnology and renewables. For institutional investors, the collapse could prompt re‑evaluation of venture capital commitments and stimulate a tightening of credit conditions for high‑growth, high‑valuation start‑ups, thereby affecting broader capital‑market liquidity.