The stock market has had a cracking year in 2025, with the FTSE 100 up 20% so far this year. Some shares have soared far more than that — like Rolls-Royce Holdings (LSE: RR.) more than doubling, and Barclays climbing 75%. But some valuations are perhaps looking a bit toppy now. And nobody can have failed to spot the worries starting to emerge over a possible global AI bubble bursting.
Does that mean I’m facing the investing outlook for 2026 with a bit of trepidation? No, quite the opposite. I’m excited by the opportunities we might have coming our way next year. Even if — or perhaps especially if — we do see a stock market crash.
Estimates suggest big tech companies have ploughed more than $400bn into AI — and related fields, like server farms — in 2025. And that might be barely the start.
Analysts suggest the AI hyperscalers could be set to invest more than $500bn in AI in 2026. And some say the spend could reach as high as $2trn, or even more.
All happening again?
Remember when the internet itself was the new tech darling? Money was pouring into all sorts of companies with no real idea how much profit they might be able to make. The best went on to great fortunes. But others collapsed to nothing when the bubble burst. The chances of that happening again with AI must surely be non-zero!
Look at ChatGPT, the poster child for the AI revolution. Recent funding rounds indicate a likely market cap for creator OpenAI in excess of $500bn. And rumours suggest an IPO in 2026 or 2027 could value it around twice that.
But most analysts expect OpenAI to post losses at least up until 2030.
UK companies aren’t stumping up anything like the cash their US counterparts are in the great AI rush. But make no mistake. If there’s an AI-led crash in 2026, I rate the chances of the UK stock market escaping the pain as very low.
A crash stock to consider
So what will I do if high-flying share prices do hit a 2026 crunch? For one thing, I hope I might get an opportunity to buy Rolls-Royce shares a bit more cheaply. I’ve missed a stunning 930% share price rise over the past five years.
Rolls has a finger in the AI pie with its small modular reactor (SMR) division being eyed up to power the massive data centres popping up everywhere. Like much that touches AI right now, Rolls-Royce’s small-scale nuclear reactors aren’t expected to make any profit for a while.
But I see a potential safety factor here. Remember the global climate change thing that some leading politicians are doing their best to pretend isn’t happening? It’s still real, and it will still bite us. And nuclear power doesn’t produce greenhouse gasses like carbon dioxide.
At today’s high price, Rolls-Royce shares look too risky for me to invest in. But any slump in 2026 will have me hoping to rectify my past mistakes.
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