David Woo, an American economist and investment strategist, has predicted a potential collapse of the artificial intelligence (AI) bubble in the latter half of 2026, warning that this could significantly impact financial markets, real yields, and the price of gold.
In an interview on July 4 with David Lin, Woo emphasized that the surge in investment linked to AI and business spending has emerged as a crucial factor in supporting economic growth. He noted that the ongoing AI investment boom has been instrumental in keeping real yields high, which poses challenges for gold and other non-yielding assets.
Investment Trends and Economic Resilience
Woo's prediction regarding the potential AI bubble is timely, as investors continue to funnel capital into AI infrastructure, data centers, semiconductor firms, and related technologies. In his view, the rising real yields are likely to persist until the AI bubble bursts, at which point gold could see improved market conditions. He stated, “gold’s biggest problem is AI,” indicating that until the AI market experiences a downturn, gold prices will continue to face difficulties.
The recent performance of the stock market underscores the pivotal role of the AI sector, which has been a primary driver of market gains over the past year. Despite earlier concerns about an economic slowdown, the U.S. economy has shown greater resilience, bolstered by stronger-than-expected data and an influx of business investment. Woo credits part of this robustness to tax incentives that promote spending on research and development, capital expenditures, and manufacturing initiatives.
Challenges for Gold Amidst AI Growth
As excitement around AI continues to grow and policy uncertainties ease, hiring and investments in AI-related sectors remain strong. These trends have made AI capital expenditures a vital component of economic growth. However, Woo argues that the AI stock bubble has kept real yields at elevated levels, which has weighed on gold prices throughout 2026.
Even though gold has experienced temporary rallies, high real yields persist as a major obstacle as investors show a preference for AI-driven growth assets rather than traditional safe havens. Woo believes that real yields may rise further until the AI boom begins to falter, indicating that the eventual collapse of the AI bubble could provide much-needed support for gold prices.
