The AI Bubble Stress Index (ABSI) is a composite score from 0-100 that tries to answer one question: is capital moving into AI faster than AI is generating real economic value?
The five components
ABSI blends five weighted signals:
- Valuation expansion (20%) — how far AI-linked equity valuations have run ahead of trailing fundamentals.
- CapEx acceleration (20%) — the rate of change in AI infrastructure spending across hyperscalers and chipmakers.
- Debt financing growth (20%) — how much of that CapEx buildout is being financed with debt rather than equity or free cash flow.
- Revenue growth slowdown (15%) — whether AI-attributable revenue growth is keeping pace with the investment growth funding it.
- Circular financing indicators (15%) — signals that revenue is being generated by continuous new capital inflow rather than independent end-user demand.
- Bond market stress (10%) — a smaller cross-check from the Long Duration Stress Index, since financing costs eventually show up here too.
Reading the score
| Range | Label | What it means |
|---|---|---|
| 0–30 | Healthy | Investment and returns are broadly in balance. |
| 30–60 | Expansion | Investment is accelerating, but not clearly decoupled yet. |
| 60–80 | Bubble Warning | Capital deployment is meaningfully ahead of monetization. |
| 80–100 | Extreme Risk | The gap between spending and realized value is wide and widening. |
A high ABSI doesn't mean the underlying technology is fake — every historical technology bubble (railroads, the internet) involved real, transformative technology. It means the financing of that technology has moved ahead of what current cash flows can support.