Johanna Kyrklund argues strong cash flows separate today's AI boom from the dot-com era, though a potential bust looms if growth expectations fall short
Here’s a statement that will either age like fine wine or like milk left on a summer porch: the chief investment officer of one of Europe’s largest asset managers says the AI trade is not a bubble.
Johanna Kyrklund, Group CIO at Schroders, has laid out a case that today’s tech and AI valuations, while admittedly frothy, lack the defining characteristics of a true speculative mania. The core argument is straightforward. Unlike the dot-com era, the companies at the center of the AI boom are actually making money.
Cash flows make the difference #
But Kyrklund’s analysis points to a fundamental distinction. The major tech firms driving AI spending today, think Meta and Google, are funding their enormous capital expenditures through robust operating cash flows, not through venture capital fairy dust and creative accounting.
Both Meta and Google have already begun reporting early revenue gains directly tied to AI features baked into their products. That’s a crucial difference from 1999, when companies with zero revenue and a website were commanding billion-dollar valuations because they had “.com” in the name.
The bubble question won’t go away #
Still, Kyrklund’s view isn’t universally shared, even among professional money managers. Surveys conducted by Bank of America in late 2025 found that over 50% of fund managers expressed concerns about an AI bubble forming in markets.
The equity concentration problem adds another layer of unease. Major S&P 500 tech firms now hold a substantial share of total market weight, creating a dynamic where a handful of companies effectively dictate the direction of the entire index.
Schroders’ 2026 outlook doesn’t dismiss bubble risk entirely. Instead, it frames the situation as a fork in the road. One path leads to continued AI-driven productivity growth, with companies successfully monetizing their investments. The other path leads somewhere considerably less pleasant.
Specifically, Schroders has flagged Q3 2026 as a potential inflection point. If AI growth expectations aren’t met by then, the firm warns, markets could experience what amounts to an “AI bust” scenario.
What investors should actually do with this #
Schroders’ answer is diversification and active management. The firm advocates for a proactive approach that monitors actual returns on AI investment rather than getting swept up in narrative momentum.
Kyrklund’s position is that the fundamentals currently support the valuations, but that support is conditional. It depends on companies continuing to translate AI spending into actual revenue growth. Today, there are real metrics, real cash flows, and real revenue figures that investors can track quarter by quarter.
Kyrklund’s Q3 2026 timeline gives the market roughly a year to prove the thesis. If AI revenue growth accelerates and capital expenditures start generating measurable returns, the “not a bubble” camp will look prescient. If those returns disappoint, a fund manager survey showing over 50% bubble concern will look like the understatement of the decade.
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