Indian American investor Kanwal Rekhi warns that the soaring valuations in artificial intelligence could lead to a market correction, drawing parallels to past financial crashes.
Indian American entrepreneur and investor Kanwal Rekhi has issued a stark warning regarding the state of the global technology market, suggesting that the current boom in artificial intelligence (AI) may be nearing a critical turning point.
In a recent Facebook post, Rekhi highlighted a striking comparison: Nvidia’s market capitalization is now roughly equivalent to the total market capitalization of all publicly traded companies in India. He described this disparity as indicative of a significant imbalance, stating, “Either Nvidia is overvalued or Indian stocks are an attractive buy. Both can’t be true.”
Rekhi characterized the situation as a full-blown AI bubble, noting that nearly 40 percent of all investments today are directed towards AI-related activities. However, he expressed skepticism about the returns on these substantial investments, saying, “I am not able to see the commensurate return on these investments.” He pointed to Nvidia’s price-to-earnings ratio, which is approaching 60, and described the expectations surrounding these valuations as “too high to be realistic.”
Concerns about the broader macroeconomic environment were also raised by Rekhi, who warned that “any hiccup in economic numbers is likely to cascade very rapidly,” attributing this instability to what he referred to as the “unstable policies” of President Donald Trump.
As a veteran of multiple market cycles, Rekhi drew parallels between the current enthusiasm for AI and previous speculative manias. He recalled the crash of 1987 and the dot-com crash, asking rhetorically, “Is an AI crash coming, soon?” His insights resonate within the technology and venture capital ecosystem, where he is recognized as a pioneer of Silicon Valley’s Indian diaspora network and co-founder of the Indus Entrepreneurs (TiE). Over the past three decades, Rekhi has supported numerous startups, making his perspective particularly relevant amid growing concerns among seasoned investors.
In recent weeks, several experts have echoed Rekhi’s warnings about a potential AI bubble. Last month, the Bank of England cautioned that global markets are facing an increasing risk of a “sudden correction” due to soaring valuations of leading AI companies. The Bank’s financial policy committee (FPC) stated, “The risk of a sharp market correction has increased. On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence. This leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic.”
A report from Stanford University’s Human-Centered Artificial Intelligence (HAI) further underscores the rapid financial growth within the AI sector. The report revealed that corporate investment in AI surged to $252.3 billion in 2024, with private funding increasing by 44.5% and mergers and acquisitions rising by 12.1% compared to the previous year. Over the past decade, total investment in AI has grown more than thirteenfold since 2014, highlighting both the scale and potential fragility of the current AI gold rush.
Rekhi’s cautionary stance reflects a growing unease among investors who fear that the current AI frenzy, driven by companies like Nvidia and OpenAI, may not be sustainable without tangible, near-term returns to justify such high valuations. As the technology landscape continues to evolve, the implications of these soaring valuations remain a topic of significant concern for market watchers.
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