American economist and investment strategist David Woo has predicted that the AI bubble could burst during the second half of 2026, a development he believes would have significant implications for financial markets, real yields, and gold prices.
Woo argued that strong investment tied to artificial intelligence and business spending incentives has become a major force supporting economic growth.
According to his assessment, the AI-driven investment boom has helped keep real yields elevated, creating a challenging environment for gold and other non-yielding assets, he said in an interview with David Lin published on July 4.
The AI bubble prediction comes as investors continue to pour capital into artificial intelligence infrastructure, data centers, semiconductor companies, and related technologies.
“I worry that real yields are going to keep going higher until the AI bubble bursts, and that’s when gold is going to get real help. In my view, gold’s biggest problem is AI. Until the AI bubble has burst, I think gold is going to continue to struggle. But my view is that there’s a very good chance the AI bubble is going to burst in the second half of the year,” Woo said.
AI impact on the stock market
The sector has been one of the biggest drivers of stock market gains over the past year, helping fuel expectations for continued economic expansion despite concerns about slowing growth earlier in the cycle.
He noted that the U.S. economy has remained more resilient than many expected, supported by stronger-than-anticipated data and continued business investment.
He attributed part of that strength to tax incentives encouraging spending on research and development, capital expenditures, and manufacturing projects.
Combined with growing enthusiasm for artificial intelligence and easing policy uncertainty, these factors have fueled hiring and investment, making AI-related capital spending a key driver of economic growth.
The strategist argued that the AI stock bubble has kept real yields elevated, weighing on gold prices throughout 2026.
While gold has staged periodic rallies, he believes high real yields remain a key headwind as investors continue to favor AI-driven growth assets over traditional safe havens.
Woo said real yields could keep rising until the AI boom loses momentum, with a potential AI bubble burst likely providing support for gold prices.
