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Why this economist says the AI rally still has a bit further to run
Why this economist says the AI rally still has a bit further to run
Sam Boughedda
Wed, February 18, 2026 at 11:52 PM GMT+9 1 min read
Investing.com – The recent underperformance of U.S. tech stocks relative to emerging markets echoes the final stretch of the dotcom era, but the AI boom is not finished yet, according to Capital Economics.
The firm’s market economist, Elias Hilmer, stated in a note that he still believes “the AI rally has a bit further to run,” even as the pattern raises questions about what happens if the bubble bursts.
Capital Economics noted that, unlike in the United States where “the AI rally has stalled in recent weeks,” tech-heavy markets in emerging Asia “have continued to ride the wave of AI enthusiasm.”
Hilmer believes this dynamic resembles “the final stages of the dotcom bubble,” when U.S. stocks lagged even as global equities rose.
Even so, Capital Economics argued that any AI bubble in emerging markets “appears smaller than both the AI and the dotcom bubbles in the US.”
The MSCI USA Index has still outperformed the MSCI EM Index by roughly 10 percent since late 2022, and valuation metrics remain far below the frothy levels seen in 2000. “Valuations then arguably looked more frothy than they do today,” Hilmer wrote.
If the bubble bursts, Hilmer expects emerging-market stocks to prove more resilient, projecting a 12.5 percent decline in the MSCI USA Index from end-2026 to end-2027, compared with a 7 percent fall in the MSCI EM Index.
The economist said most EM financial markets “appear more stable than in the early 2000s,” adding that stronger external positions in Asia and currency dynamics should cushion the blow.
Overall, Capital Economics said that while risks remain, this episode “may play out differently,” and the AI rally “has further to run.”
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