Børge Brende, President of the World Economic Forum (WEF), has warned of the potential formation of three major global economic bubbles — in artificial intelligence (AI), public debt, and cryptocurrency — as sharp sell-offs in technology stocks trigger renewed market jitters.

“We may soon see the emergence of three bubbles: the crypto bubble, the AI bubble, and the debt bubble,” Brende said at a press conference in São Paulo, Brazil’s financial hub, adding that global public debt is now at its highest level since 1945.

Analysts and brokers have noted that while the recent correction in technology stocks signals caution, it is not yet cause for panic, as markets had reached record highs several times earlier this year, with some valuations appearing overinflated.

Over recent months, global financial markets have continued to trend upward despite concerns about high interest rates, persistent inflation, and trade tensions, largely driven by optimism over the potential of AI to revolutionise productivity and reshape business competitiveness.

Brende noted that while AI offers immense opportunities to boost productivity, it could also disrupt office-based employment, particularly in major cities where administrative and data analysis roles are prevalent and easily automated.

“In a worst-case scenario, we may see the emergence of a new ‘Rust Belt’ in major cities as large numbers of office workers lose their jobs, with AI driving higher productivity and lower labour costs,” he warned, citing recent job cuts at Amazon and Nestlé as examples.

Nonetheless, Brende emphasised that technological change has historically improved productivity and created long-term economic benefits, noting that innovation remains a key driver of national prosperity.

“As productivity rises, workers can earn better wages, and society as a whole becomes wealthier,” the WEF president concluded.

Concerns over an “AI bubble” are becoming increasingly evident, as most Asian stock markets closed lower yesterday (November 5) following a widespread sell-off in artificial intelligence (AI)-related stocks, mirroring the downward trend seen in the US markets.

The downturn began after US software company Palantir reported better-than-expected Q3 earnings, but its share price plunged by about 8%. Investors expressed concerns about the company’s true valuation, with its forward price-to-earnings (P/E) ratio exceeding 200 times. This has sparked broader fears that software firms and the AI investment boom may be overvalued, highlighting the growing risk of prices far above fundamental value.

According to CNBC, the strong rally in AI-related stocks has driven the S&P 500’s forward P/E ratio above 23 times, approaching its highest level since 2000.

While AI stocks have propelled the market to record highs in recent months, Anthony Saglimbene of Ameriprise warned that without a correction, valuations in this sector will become dangerously elevated — a warning sign of excessive price risk.

The latest sell-off underscores growing investor anxiety after several analysts and prominent investors had already warned of a potential “AI bubble”.

Jamie Dimon, CEO of JPMorgan Chase, warned in mid-October that “many assets are entering bubble territory,” while Jane Fraser, CEO of Citigroup, also cautioned about “overstretched asset valuations.”

The Bank of England recently noted that the risk of a sharp market correction is rising, while the International Monetary Fund (IMF) expressed concern over market volatility, citing asset prices that are far above their fundamental levels.

Currently, investors buying stocks in the S&P 500 are paying over 41 times the average underlying earnings — a valuation level last seen only during the dot-com bubble, when ratios were not significantly higher than they are today.