Remember when your friend started bragging about their crypto portfolio right before everything crashed? Well, there’s a similar vibe happening in AI land right now, and the warning signs are getting harder to ignore.
Capital Economics just dropped some research that’s basically the financial equivalent of “we need to talk.” They’re pointing to something called equity issuance – which is just fancy talk for companies selling more stock to raise money. And apparently, when this number gets really high, it’s historically been about as reliable as a weather forecast for predicting when bubbles pop.
Here’s the thing: AI companies are issuing stock like it’s going out of style. We’re talking levels that match some of the greatest hits of market disasters – the dot-com crash, the 2008 financial crisis, and that weird pandemic stock rally when everyone thought they were the next Warren Buffett.
Think about it logically. When companies are frantically selling shares, it’s usually because they know the getting is good right now. It’s like selling your concert tickets when you realize everyone wants them – except in this case, the concert might be a bubble about to burst.
Joe Maher from Capital Economics put it perfectly: “One warning sign that a bubble is close to bursting is high and rising gross equity issuance.” Translation: when everyone’s trying to cash in at once, the party’s probably almost over.
Now, before you panic-sell your NVIDIA shares, there’s a twist. Companies are also buying back their own stock like crazy, so the “net” issuance (total new shares minus buybacks) is still negative. It’s like everyone’s playing financial musical chairs, and the music hasn’t stopped yet.
But here’s where it gets interesting: historically, when net equity issuance flips positive, that’s been the kiss of death for rallies. It happened right before the dot-com bubble popped, before 2008, and before the pandemic rally fizzled out. It’s like the market’s version of “last call” at a bar.
And guess what might push us into positive territory this year? Some of the biggest names in AI – SpaceX, OpenAI, Anthropic – are all eyeing public offerings. It’s like the final boss battle of equity issuance.
The really sneaky part? A lot of this action is happening in private markets too. So even if you’re not seeing it in your daily stock ticker, there’s a whole shadow economy of AI companies raising money behind the scenes.
Capital Economics has been predicting this tech bubble would burst in 2026 for years now (they’re like that friend who keeps saying “I told you so” before anything actually happens). Most Wall Street forecasters are still bullish, but let’s be honest – they’re paid to be optimistic.
The bottom line? This equity issuance signal isn’t a crystal ball, but it’s definitely worth paying attention to. It’s like your car making a weird noise – maybe it’s nothing, but maybe you should start looking for a mechanic.
Stay smart out there, and remember: when everyone’s rushing for the exits, it’s usually because they can smell the smoke.