Remember when everyone and their grandmother was talking about AI stocks like they were the next sliced bread? Well, hold onto your portfolios because there’s a quiet little warning signal flashing that suggests this AI party might be closer to last call than we think.
Capital Economics just dropped some research that’s basically the financial equivalent of noticing the host starting to clean up while you’re still having fun. They’re pointing to something called “gross equity issuance” – which sounds boring but is actually pretty telling.
Here’s the deal in plain English: When companies are hot and everyone wants a piece of them, they start issuing more stock to cash in on the hype. Think of it like a popular restaurant suddenly opening five new locations because everyone’s lining up. Sounds smart, right? Except historically, when this happens too much, it’s often a sign that the party’s about to end.
Joe Maher from Capital Economics noticed that gross equity issuance by US non-financial companies is now hitting levels we haven’t seen since some pretty memorable market meltdowns. We’re talking dot-com bubble territory, pre-2008 financial crisis vibes, and pandemic stock rally peaks. You know, all those times when everyone thought “this time is different” – spoiler alert: it wasn’t.
The logic is pretty straightforward. When companies flood the market with new shares, eventually there’s just too much supply for investor demand to handle. It’s like when your favorite indie band suddenly has their music everywhere – the novelty wears off, and people start looking for the next big thing.
Now, before you start panic-selling your NVIDIA shares, there are a few things to keep in mind. First, when you adjust for how expensive stocks are right now (and boy, are they expensive), the equity issuance isn’t quite as extreme as it looks. Second, companies are still buying back their own stock like crazy, so the “net” equity issuance is still negative.
But here’s where it gets interesting: Net equity issuance has historically turned positive right around the time major market rallies peaked. It’s like that friend who always shows up to the party just as everyone else is getting ready to leave.
And get this – we might see net equity issuance go positive this year if companies like SpaceX, OpenAI, and Anthropic decide to go public as expected. Plus, there’s a ton of money flowing into private AI companies right now, which could be another warning sign that the bubble is getting a bit too bubbly.
Look, most Wall Street forecasters are still bullish on 2026, and maybe they’re right. But Capital Economics has been calling for a tech stock bubble burst for a few years now, and this equity issuance signal is just another piece of evidence in their case.
The bottom line? Keep enjoying the AI revolution, but maybe don’t bet the farm on it lasting forever. After all, every great party eventually ends – the trick is knowing when to call your Uber.