Capital Economics argues the AI rally still has room to grow despite recent underperformance in U.S. tech stocks. Market economist Elias Hilmer notes that while the pattern echoes the dotcom era's final stretch, the current AI boom appears smaller than both the AI and dotcom bubbles in the U.S.

Hilmer points to emerging Asian markets where tech-heavy stocks continue riding AI enthusiasm, contrasting with the stalled rally in American markets. The MSCI USA Index has outperformed the MSCI EM Index by roughly 10 percent since late 2022, yet valuation metrics remain far below the frothy levels seen in 2000.

Should the bubble burst, Hilmer projects 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 expects emerging-market stocks to prove more resilient, citing stronger external positions in Asia and currency dynamics that should cushion the blow. Overall, Capital Economics believes this episode may play out differently than the dotcom crash.