Capital Economics warns of the end of the AI stock boom and recommends defensive diversification

The British firm Capital Economics published an analysis on October 29, 2026, warning of a possible slowdown in the enthusiasm for artificial intelligence (AI) related stocks, urging investors to turn toward defensive sectors. This recommendation, which indirectly targets assets such as Bitcoin (BTC) and Ethereum (ETH), could influence capital flows and volatility in technology and crypto markets in the coming months. Context Since 2023, AI-related stocks have experienced meteoric growth, driven by companies such as NVIDIA (NVDA) and Microsoft (MSFT), whose valuations rely heavily on revenue prospects derived from AI. In 2025, these stocks showed an average increase of 45%, a pace that slowed to 12% in the first quarter of 2026, according to Capital Economics. This slowdown occurs in a context of high correlation (0.78) with the Nasdaq Composite, highlighting their dependence on technological cycles. At the same time, cryptocurrencies, although not directly targeted by the analysis, remain sensitive to institutional capital movements. Bitcoin and Ethereum, whose prices evolve based on risk appetite, could be affected by a sectoral rotation toward less cyclical assets. CryptoScore Pro data as of October 29, 2026, show moderate pressure on transaction fees (1.073 sat/vB for Bitcoin, 0.42 gwei for Ethereum), suggesting stable market activity but without excessive excitement. The Facts The analysis by Capital Economics, published on October 29, 2026, is based on several key indicators: The growth rate of AI stocks dropped from +45% in 2025 to +12% in the first quarter of 2026 , according to Bloomberg data. AI equity funds represent 15% of total invested capital , or approximately $300 billion in assets under management, according to the same source. Capital Economics recommends an allocation of 20 to 30% of portfolios toward defensive sectors (utilities, consumer staples, healthcare) to mitigate the risks of a reversal. The firm predicts a decline in the S&P 500 index to 6,500 points by the end of 2027 , a level lower than the mid-2026 forecasts (7,000 to 8,250 points). This projection is based on two scenarios: a gradual deflation of the AI bubble or its abrupt bursting. No cryptocurrency-specific data is provided, but market indicators as of October 29, 2026, reveal: A Bitcoin mempool at 55,880 transactions , with stable fees at 1.073 sat/vB (source: CryptoBriefing). An Ethereum gas price of 0.42 gwei , indicating moderate network activity (source: CryptoScore Pro). Mixed recent performance for crypto assets: Bitcoin is down 1.44% over 24 hours and 0.67% over 7 days , while Ethereum has dropped 2.67% over 24 hours and 2.25% over 7 days (CryptoScore Pro data as of October 29, 2026). CryptoScore Pro data on tokenized stocks (via Robinhood Token) show contrasting valuations: NVDA : market capitalization of 18.89 million dollars (rank #976), down 1.43% over 24 hours . MSFT : capitalization of 1.85 million dollars (rank #2463), down 3.95% over 24 hours . The Crypto Fear & Greed index stands at 51/100 (neutral) as of October 29, 2026, reflecting increased investor caution. Understanding Key Concepts AI Stocks and Sector Rotation AI stocks refer to shares of companies whose revenues primarily depend on artificial intelligence, such as NVIDIA (graphics chips for AI) or Microsoft (cloud services and AI tools). A sector rotation occurs when investors move their capital from one sector to another, often in reaction to changes in economic outlooks. For example, if AI stocks slow down, funds could shift toward defensive sectors such as healthcare or utilities, which are less sensitive to economic cycles. Defensive Sectors Defensive sectors group together companies whose demand remains stable, even during periods of economic slowdown. These include consumer staples (food, household products), healthcare (medicines, medical equipment), or public utilities (electricity, water). Their resilience makes them safe-haven assets, like gold or government bonds, but with potentially higher returns. Correlation and dependence on technological cycles Correlation measures the degree of connection between two assets. A correlation of 0.78 between AI stocks and the Nasdaq Composite means that these securities often move in the same direction. This dependence on technological cycles exposes them to sharp reversals if expectations regarding innovation or profits are not met. For example, a slowdown in AI infrastructure investments could weigh on valuations. Mempool and transaction fees The mempool (memory pool) is a queue of transactions awaiting validation on a blockchain network, such as Bitcoin. A crowded mempool (55,880 transactions here) indicates high activity, but can also signal congestion. Transaction fees (1.073 sat/vB for Bitcoin) reflect the cost paid by users to speed up the processing of their transactions. High fees suggest increased demand, while low fees (such as 0.42 gwei for Ethereum) may indicate moderate activity. Analysis: what is at stake The slowdown in the growth of artificial intelligence (AI) related stocks, falling from +45% in 2025 to +12% in the first quarter of 2026 according to Capital Economics, reveals a classic mechanism of sector rotation. When return expectations for a sector fade, investors reallocate their capital toward less cyclical assets, such as public utilities or healthcare, perceived as safe havens. This movement, amplified by a correlation of 0.78 between AI stocks and the Nasdaq Composite since 2023, suggests an increased dependence on technological cycles, the reversal of which could lead to downward pressure on stocks such as NVIDIA (NVDA) or Microsoft (MSFT). For cryptocurrencies, the impact remains indirect but tangible. A rotation toward defensive sectors could reduce risk appetite, affecting volatile assets such as Bitcoin (BTC) and Ethereum (ETH), whose prices remain sensitive to institutional flows. According to CryptoScore Pro data as of October 29, 2026, BTC…