AI bubble fears grow as SpaceX readies record IPO

As SpaceX prepares to price what will be the largest stock-market debut in history, a wave of unease is rippling through the very market that should be celebrating. The source of the anxiety is not rocket science. It is artificial intelligence.

Multiple warning signs are now converging simultaneously. Together, they represent the most significant challenge yet to the trade that has propelled global equities for the past two years.

The most obvious red flag is in the software sector. Wall Street has spent 2026 navigating what Jefferies traders have dubbed the ‘SaaSpocalypse’. This rolling selloff has, by some estimates, wiped roughly $2 trillion from the S&P software index since its peak in late 2025.

The concern is highly specific. If AI agents can perform the duties of an entire sales team, companies will need far fewer software licenses. This directly threatens the per-seat licensing model that has underpinned the modern software industry for decades.

Private-equity giant Apollo has already translated that fear into action. The firm now screens all software deals specifically for AI-displacement risk. It holds zero private-equity exposure to software and keeps the sector below 2% of its total assets.

Apollo’s reasoning is rooted in concentration. Software grew from roughly a tenth of global buyout volume to nearly 40% at its peak, a level the firm describes as “a fairly significant red flag.”

The jitters are spreading beyond software. Hong Kong and mainland Chinese shares fell on Wednesday, with tech stocks hit hardest, as AI-bubble fears tracked a retreat on Wall Street.

In Washington, Senator Elizabeth Warren has introduced the AI Bubble Transparency Act. The bill would force banks to disclose their debt and equity exposure to chipmakers, data centres and hyperscalers. She frames the concentration as a systemic risk to the financial system.

Meanwhile, Henry McVey, KKR’s top macro strategist, told clients that the AI boom is real but will make the economy “more extreme than anything we have seen since the start of the second industrial revolution” in the 1870s. Some sectors are “starved” for capital, he wrote, while a handful,tech, high-end services and government,run “flush.” KKR sees defence and power as the likeliest long-term winners.

Underpinning everything is the sheer scale of capital expenditure. Hyperscaler infrastructure spending is approaching $660 billion this year. It is the largest corporate investment programme in history outside of wartime, and it is increasingly funded by debt.

Amazon’s borrowing has surpassed $225 billion. Oracle has already overshot its own capex guidance, with tens of billions more pledged. The bear case is straightforward: spending on this scale only pays off if AI moves from simple “copilot” features to autonomous agents that justify the next order of magnitude of compute. If adoption plateaus, the return on $660 billion a year falls below the cost of capital.

The bull case is equally compelling. This is not the year 2000. As TNW has noted, valuations and concentration sit above dot-com peaks on some measures, with the CAPE ratio near 38. But unlike the dot-com darlings, today’s market leaders are enormously profitable, and the capex cycle has barely begun to generate results.

The honest answer to “is this a bubble?” is that no one can know until the spending either delivers or it doesn’t. What changed this week is that the market started asking the question out loud, after two years of refusing to do so.

SpaceX is not an AI company. But its debut, along with the OpenAI and Anthropic listings that will follow, will be the closest thing to a real-time referendum on whether investors still believe. Even market-watchers who think the listing will not “break” the bull market, as CNBC put it, are uneasy about what comes after it.

A wobble is not a crash. But for the first time in a while, the people writing the cheques are visibly weighing the question the boom has waved away: what, exactly, does all this return?