Schwab's Sonders: AI boom echoes Enron but isn't doomed to crash

Liz Ann Sonders, Charles Schwab's chief investment strategist, told Business Insider that the "extreme enthusiasm" and circular deals between tech companies fueling the AI trade remind her of the internet bubble 25 years ago. She does not think a comparable collapse is inevitable.

Her distinction is scale and profitability. Nvidia sits on a roughly $5 trillion market cap backed by $47 billion in quarterly revenue and $26 billion in net income, a profile unrecognizable from the small, cash-burning dot-com names of a generation ago.

The danger, Sonders said, sits on the demand side, not the accounting side. She warned that AI firms could "fail to deliver" on the bullish growth forecasts now priced into their equity, calling that mismatch "the ultimate risk" and one where "you've set the expectations bar too high."

She sees cracks forming outside the AI leaders too. "Speculative activity in meme stocks, drones, and quantum computing suggests some 'cracks' appearing elsewhere," per her read, and gold's surge above $4,000 reflects FOMO more than fundamentals. On the macro side she pointed to rising pressure on lower-income consumers and a softening labor market, and said investors should "be mindful" of a weakening jobs backdrop that the government shutdown has helped obscure.

The Enron parallel, in her telling, is behavioral rather than structural. The circular-financing patterns rhyme, but the balance sheets underneath don't. That leaves the downside case not as fraud unraveling, but as a plain re-rating if AI revenue growth stalls before the capex bill comes due. Two AI experts in our Who's Who directory have shared Sonders' comments.