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BIZ & FINANCE SATURDAY | MAY 30, 2026

What if AI boom goes into reverse?

I NVESTORS should be asking not whether the AI boom will end, but what will happen to markets when it does and where safety may be found. I have previously argued that the business models of OpenAI, Anthropic and other AI darlings look increasingly unsustainable and that hyperscal ers such as Meta and Amazon face daunting maths to make their data centre investments pay off. Yet, for now, the investment surge contin ues to accelerate. Annual investment in technology equipment and software reached US$1.5 trillion last year, about 70% more than during the inflation-adjusted peak of the late-1990s technology, media and telecommunications (TMT) bubble, better known as the dotcom boom. While I do not expect the AI boom to come to a crashing stop any time soon, growth will stall at some point. Every tech boom since the end of WW2 has been followed by a drop off in tech investment. After the cybernetics boom ended in 1962 and the speculative US “Go-Go” stock market boom of the late 1960s faded in 1969, tech investment dropped 5%. Similarly, after the TMT bubble burst in 2000, it declined by 18.6% over two years, according to the Bureau of Economic Analysis. intelligence (AI) company Anthropic said Thursday it had raised US$65 billion (RM258 billion) in a new funding round that values the Claude maker at US$965 billion, more than its archrival OpenAI, the maker of ChatGPT. The latest fundraising round confirms Anthropic’s place as one of the most significant players in AI, with the startup led by Dario Amodei having drawn fans for its coding powers and state-of-the-art models. Anthropic’s rise came by doubling down on delivering generative AI to

bear market. Why would Europe fall further if the AI correction starts on Wall Street? In a slowdown or recession, US investors tend to repatriate foreign holdings and move into safer assets. European investors may also pull money home, but the net effect is negative for the region, adding selling pressure to its equity markets. In the second scenario – a typical tech-driven recession with a 6% investment drop – the US and Europe would both likely enter recession, compounding the selloff in stock markets. That could mean a drop of more than 20% in the US market and more than 30% in Europe. In the third scenario – a full TMT-style crash – drawdowns could exceed 50%. The best position to take in this case would likely be cash, but fund managers and other investors who want to stay in equities would instead need to find calmer waters. But where might those be? Looking for a hedge A reversal would likely hit European equities harder on average – yet the best hiding places may also be on the continent. One sector that looks particularly attractive is European construction and infrastructure. Germany has committed some Dragoneer, Greenoaks and Sequoia Capital. It also included US$15 billion in previously committed investments from cloud giants, including US$5 billion from Amazon. Semiconductor firms Micron, Samsung and SK hynix – whose products are crucial to the technology – also participated as strategic infrastructure partners. The company said Claude is now the first frontier AI model available across all three of the world’s largest cloud platforms – Amazon Web Services, Google Cloud and Microsoft Azure.

12.5% of its GDP to infrastructure over the next decade, spending that should continue regardless of what happens in the AI space. In fact, if a recession did hit, such spending may even be accelerated to provide fiscal stimulus to an ailing economy. In addition, European pharmaceuticals and food – which have little exposure to AI and are typically fairly “recession proof” – could also outperform their US equivalents in such a scenario. The reason, once again, comes down to investor flows. US investors, hardest hit by a tech crash, would presumably be forced to sell more of their other holdings to cover losses or margin calls, driving broader market declines and larger drawdowns even in defensive sectors. European defensives would likely face less of that forced selling pressure. This does not mean these sectors would be immune to a wider selloff, but the key is to find spots that potentially offer better relative value in this scenario. While the AI boom may seem unstoppable, it will lose steam at some point, and investors should prepare today rather than trying to fix their portfolios in a panic. – Reuters This article is written by The funding comes as Anthropic navigates a high-profile legal dispute with the Pentagon, having sued the Defence Department after it designated the company a supply chain risk – a move Anthropic called unconstitutional retaliation for its refusal to grant the military unfettered access to its AI models. Mythos is Anthropic’s powerful, next-gen AI model with unprecedented cybersecurity capabilities. This has led Anthropic to restrict its access to security partners rather than releasing it to the public. – AFP

As AI investment surges, investors are looking beyond the boom and preparing for the eventual slowdown. – UNSPLASH PIX

What might a pullback look like? Given how enormous AI investment currently is, a pullback could have serious and broad implications for markets and economies globally. My models indicate that we don’t need a repeat of the TMT crash to push the US, Britain and the euro zone dangerously close to recession. Just a 5% drop in US tech investment would significantly harm these three major economies, my analysis shows, with real GDP in each declining by up to one percentage point in the year after such a shock. The US economy would likely recover relatively quickly, while the enterprise clients rather than general users, the path initially chosen by archrival OpenAI. Founded by former OpenAI employees, including CEO Amodei, Anthropic has a special focus on AI safety even as it rushes out new products in order to remain in the AI race. “This funding will help us serve the historic demand we are experiencing, stay at the research frontier, and bring Claude to more of the places where work happens,“ said Krishna Rao, Anthropic’s chief financial officer.

less dynamic euro zone would struggle for longer. But equity markets on both sides of the Atlantic would likely not take such a shock in stride. To gauge the market risk, I modelled three possible endings to the AI capex boom: a mild correction, a normal recessionary downturn and a full TMT-style bust. In the first, the boom rids itself of short term excess and drops 4.5% before recovering. I estimate that the US stock market would enter a correction, with a drawdown of around 15%. European markets, meanwhile, would likely drop more than 20% and enter a new Anthropic’s near-trillion-dollar valuation puts it ahead of OpenAI, which was valued at US$852 billion in March. Both companies could go public as early as this year. Ahead of them, Elon Musk’s SpaceX, which absorbed his AI company, xAI, in February, could see shares begin trading as early as June 12, targeting a valuation of approximately US$1.75 trillion in what would be the largest IPO in history. Anthropic’s round was led by major Silicon Valley venture capitalists Altimeter Capital,

Joachim Klement, an investment strategist at Panmure Liberum. Anthropic raises US$65b in funding round, valuation nears US$1 trillion SAN FRANCISCO: Artificial

Education retains its importance in the Malaysian landscape for parents, students and stakeholders. The changes are fast paced with new developments in new fields of study such as cybersecurity, data protection, augmented and virtual reality, machine learning in education, digital education and artificial Intelligence. Leading the way are universities, who are invited to showcase their latest programmes, curriculum and content in our Education Focus for 2026.

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