AI Bubble 2025: Goldman Sachs & Bank of England Issue Urgent Warning

So Wall Street is officially freaking out about AI stocks. On November 7, 2025, Goldman Sachs CEO David Solomon dropped a bombshell: "I think a 10-20% equity market drawdown is likely within the next two years."

This isn't some analyst's hot take. This is the head of Wall Street's most powerful investment bank saying the AI bubble is about to pop. And he's not alone.

When Central Banks Start Using the Word "Bubble," Pay Attention

The Bank of England's Andrew Bailey just explicitly called it an "AI bubble"—the first major central banker to use that exact language. That's huge. Central bankers are careful with words. They don't drop "bubble" lightly.

His exact quote: "Valuations in AI-exposed equities have reached levels inconsistent with historical precedent and underlying cash flow generation."

Translation: These stocks are ridiculously overpriced and everyone knows it.

Meanwhile, the ECB is talking about imposing "AI exposure limits" on banks. The Fed is quietly worried about concentration risk. It's coordinated concern from people who actually matter.

The Seven Red Flags Screaming "Sell"

1. Retail investors are back to dot-com levels 31% of AI stock trading volume is retail, just like 2000. Robinhood users are dumping 42% of their portfolios into AI stocks.

2. The valuations are unhinged AI stocks average 78x forward P/E. The dot-com peak was 62x. We're worse than that.

3. "AI Washing" is everywhere 400 companies mentioned AI in their earnings calls but only 23 actually disclosed AI revenue. It's just like 2017 blockchain hype.

4. Insiders are dumping stock $18.7 billion in insider selling in Q3 2025—the highest on record. Jensen Huang sold $1.1B of NVIDIA. That's not a good sign.

5. The junk companies are up the most C3.ai? Palantir? These trade at 90x P/E with negative earnings. Meanwhile they're up 200%+. This only ends one way.

6. The options market shows pure panic Put/call ratios at historic lows. Everyone's complacent and holding calls. That's bearish as hell.

7. Credit markets are cracking 73% of AI company debt has zero protections (covenant-lite). Credit default swaps are spiking.

The Stocks That Will Get Destroyed

Extreme Risk (70-90% downside): C3.ai, Palantir, SoundHound AI High Risk (50-70% downside): AMD, Super Micro Computer, Tesla's AI premium Moderate Risk (30-50% downside): NVIDIA, Snowflake Safer Bets (15-25% downside): Microsoft, Google, Amazon

NVIDIA is real—78% of revenue is actually AI—but at 42x forward P/E, even the good ones are bubble-priced. Fair value is probably $90-110 vs current $128.

What Actually Works Right Now

1. Sell half of your speculative stuff If you own C3.ai or Palantir, sell 50%. Don't try to time the bottom.

2. Rotate into infrastructure The real winners aren't the AI software companies—they're the "picks and shovels" plays. Companies like Vertiv (data center cooling), Legrand (electrical equipment), Schneider Electric. These have real revenue, real assets, and trade at reasonable valuations.

3. Buy puts as insurance $120 puts on NVIDIA for 4% of your position cost isn't that expensive for protection.

4. Watch insider Form 4 filings When multiple executives sell in the same week, that's a real warning sign. SMCI crashed 24% and this signal would have caught 80% of the decline.

5. Keep cash for the dip When this correction hits, Microsoft and Google will be down 25-30%. That's when you buy, not now.

The Reality Check

Look, this isn't necessarily 2008. Real companies like Microsoft and Google have legitimate AI revenue—around $250 billion combined. That's not zero like dot-com. The technology actually works and creates value.

But 60% of AI stocks are pretenders with zero AI revenue, negative earnings, and names like "C3.ai" that are up 250% this year. Those will crash 70-90%.

Here's what probably happens:

Q1 2026: Earnings disappointments, analyst downgrades, panic selling
Q2-Q3 2026: Capitulation—margin calls, forced liquidation, the real crisis
Q4 2026-2027: Survivors emerge, prices stabilize at reasonable levels
2028+: The winners (Microsoft, Google, infrastructure plays) actually make money

Your Checklist

Only one question really matters: Do you own unprofitable AI stocks trading above 30x sales? If yes, sell half today. That's it.

Also ask yourself:

• Am I using margin? (Stop immediately)
• Do I know the actual AI revenue % for each holding? (If no, you need to know)
• What % of my portfolio is this? (If over 20% in unprofitable AI, that's irresponsible)

The Bottom Line

Goldman Sachs and the Bank of England are warning about a crash because the data clearly shows a bubble. $15 trillion in AI market cap, but AI only represents about 15% of actual earnings. That math doesn't work.

This is like dot-com 2.0, except the good companies (Microsoft, Google, infrastructure) will survive and thrive. The pretenders will go to zero.

You don't need a perfect strategy right now. You just need to not be holding the bag when this corrects. Sell your worst positions, keep some dry powder for the dip, and sleep better at night.

The question isn't whether this corrects. It's whether you're ready for it.

---

Keywords: AI bubble, AI stocks, tech bubble 2025, Goldman Sachs warning, Bank of England, NVIDIA stock, AI crash, AI investment risks, market correction