Dan Niles warns AI stock rally may face 30% to 50% correction in early 2027

Fund manager Dan Niles warned that the AI-driven rally in chip and technology stocks could face a sharp correction by early 2027, with some highflying names potentially falling 30% to 50% after rapid gains. Niles told the “Master Investor” podcast that the current AI cycle resembles the 1997-1998 phase of the internet buildout, not the 1999 peak. He said AI infrastructure spending is entering its third to fourth year after ChatGPT’s late-2022 launch, with demand for AI agents driving token usage and compute needs. He said that supports continued upside for AI-related stocks, including Intel Corp. (INTC), despite short-term overbought conditions. Niles said he would tolerate a potential 15% to 20% near-term decline in Intel, expecting the stock to be higher by year-end. A JPMorgan Chase & Co. (JPM) survey of 56 global investors found 54% expect a U.S. equity correction of more than 30% in 2026 or 2027, with 45% pointing to 2027.