# How AI could live up to the hype and still leave investors disappointed > Source: > Published: 2026-08-10 15:53:38+00:00 # How AI could live up to the hype and still leave investors disappointed [Business Insider](https://www.businessinsider.com) Moody's said that AI could be end up being a powerful force in the economy, but still lead to more muted stock gains in the coming years. - The stock market's gains have been predicated on AI turning out to be a game changer for businesses and the economy. - Moody's says even if that turns out to be the case, it's possible that stock gains are muted. - Valuations are already high, and there's a possibility the market is in a bubble that's at risk of bursting. AI hype is often divided into two main schools of thought: AI will be a game changer for businesses, the economy, and investors, or AI will disappoint on some or all of those fronts. According to Moody's, there's chance for a middle-of-the-road scenario that combines elements of the two. Unfortunately for investors, the base case it sees is for the technology to ultimately reshape businesses but be relatively underwhelming for markets, especially given how the endless hype has already produced enormous returns and sky-high valuations. "The internet was a game-changing technology that resulted in enormous productivity gains and ultimately generated significant profits," Zandi wrote. "However, investors discounted all this and much more. Stock market valuations—stock prices relative to corporate earnings—surged." Yet, in the firm's baseline scenario for the AI boom, AI is powerful force in the economy but "stock prices do not rise much, if at all, through the remainder of this year and next," and it sees the coming years for S&P 500 returns as more muted than the boom that helped lift the [benchmark](/glossary/benchmark) index in the earlier era of the AI buildout. A chart shared by Moody's shows that its base case is for average annual returns to slowly dwindle, predicting 6.2% average annual growth from 2035 to 2030 and 3.8% annual growth from 2030 to 2035. On a 10-year basis, the comparison is even more stark. The S&P 500 returned 11.7% annually from 2015 to 2025. Moody's predicts the 10-year average gain from 2025 to 2035 will be 5%. As the economists noted, stock valuations have only reached their current levels a few times, including in the months leading up to the stock market crash of 1929 and leading up to the collapse of the [dot-com bubble](https://www.businessinsider.com/stock-market-bubble-ai-valuations-nvidia-broadcom-dot-com-crash-2026-6) in the early 2000s. While today's AI market isn't quite at the same levels the internet mania, it's not far off. By some metrics, the AI frenzy is more pronounced. As Zandi [previously highlighted](https://www.businessinsider.com/ai-bubble-debt-bond-record-issuance-dot-com-crash-tech-2025-12), AI-linked corporate borrowing has eclipsed debt levels of the dot-com era. If the AI bubble that Zandi and his team are eyeing bursts, it would likely cause consumer spending to plunge, given the wealth effect of high stock prices has led US households to keep spending. This could tip the economy into a recession, Zandi said. "If the current market trend persists, a stock market bubble seems more likely than not," Zandi wrote. "The final ingredient for a bubble is that nearly all the naysayers capitulate. They have called out the bubble for so long that they are no longer considered credible. Any skepticism is thrown to the side, and the bubble inflates more." While the economists don't directly say that they see an AI bubble on the verge of bursting, they also note they see some things that could bring the party to an end. "There are many potential catalysts for the bursting of the AI stock market bubble. Investors might grow impatient and sell their holdings as long-awaited returns from firms' AI bets get pushed further into the future. Moody's said that history suggests there's reason to be optimistic that AI will be a game changing force for the economy. It compared it to previous technological explosions like the internal combustion engine and the personal computer as examples of major disruptions that still generated substantial gains in income and wealth, while creating new jobs for workers whose roles were made obsolete. Even if that plays out for AI, though, the economists still see the distinct possibility that many tech stocks are priced too high, leading to a strong likelihood that AI will fail to generate enough of a return for companies to justify [high valuations](https://www.businessinsider.com/ai-boom-has-4-bubble-signs-could-burst-2026-economist-2025-12), and even if they meet expectations, it still might [not be enough to please Wall Street](https://businessinsider.com/tesla-alphabet-stock-price-q2-earnings-capex-ai-spending-tsla-2026-7). [Business Insider](https://www.businessinsider.com/ai-stocks-investing-tech-economy-moodys-mark-zandi-sp500-returns-2026-8) Get AI news in your inbox Daily digest of what matters in AI.