Why 2025 Will Be the Year the Tech and AI Bubble Bursts (and How to Avoid It)

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According to the investment bank, the slowdown is likely to be driven by a “likely reversal” in the rate of change in revenue growth, coupled with tight supply-demand conditions. Most exposed segments? Semiconductor materials and the AI ​​supply chain, which are likely to take the brunt of the shock due to increased price volatility and high operating leverage.

The semiconductor industry, in particular, is believed to be in the late cycle. Sure, chips have ridden the AI ​​wave, but what comes next could be more complex. The question remains how demand for AI will evolve by 2025-2026. While no one questions the current appetite for graphics processing units (GPUs) — as evidenced by Nvidia’s performance — the sustainability of this trend raises questions.

Morgan Stanley warns: Despite the current shortage of AI chips, this train will eventually slow down. Chips will inevitably catch up with demand, becoming cyclical in turn. Maintaining the current breakneck pace of gains is becoming increasingly difficult. Analysts are therefore expecting a gradual slowdown in revenue growth until 2025.

How to protect your tech stock portfolio?

Faced with this scenario, what strategy should you adopt? The bank recommends avoiding overpaying for stocks at the end of the cycle, although the exact timing of the peak remains difficult to determine. Once the peak has passed, she argues, the cycle becomes similar to all others. To protect against this predicted turbulence, Morgan Stanley therefore recommends favoring quality stocks with substantial free cash flows, as well as stocks with attractive valuations.

This analysis highlights a paradigm shift: the era when blindly betting on tech giants was enough to outperform the market is coming to an end. Now, a more refined approach, focused on detailed analysis of financial fundamentals, is required to unearth the nuggets of tomorrow.

For investors who don't have the time or expertise to do this in-depth work, artificial intelligence offers an attractive alternative. So we asked several AIs who gave us the following advice:

1. Sector diversification: don't concentrate all your assets in tech, but explore other promising sectors.
2. Focus on quality: favor companies with solid fundamentals and robust cash flows.
3. Increased vigilance: closely monitor economic indicators and technological developments to adjust your strategy.

If AI doesn't seem relevant to you, many banks and specific applications allow you to benefit from tailored advice. For example, on its investment tool, N26 offers a real-time analysis of each stock or ETF. This analysis is carried out by financial professionals with solid reputations. A guarantee of seriousness and security, even if zero risk does not exist in terms of investment.

• Morgan Stanley predicts a cyclical slowdown in the tech sector in 2025
• The era of easy outperformance by tech giants is coming to an end
• A more refined approach and the use of AI tools could help investors navigate this new context

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