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‘Am I the Problem?’ Why Gaming Crossovers Are a Love-Hate Thing

In navigating my own relationship with the phenomenon of characters from one game appearing in another, I talked to some of the devs behind the games to get a better sense of how these crossovers work and why companies pursue them.

When my friends want to play Magic: The Gathering, I wade through my two-dozen or so decks built for Commander — the card game’s casual, multiplayer format. I might choose the deck built around Elenda, the Dusk Rose, a vampire saint who can create legions of vampires. Maybe I’ll take my Narset, Enlightened master deck, which lets me cast powerful spells for free when she attacks. Both Elenda and Narset are original characters from Magic: The Gathering.

Or maybe I’ll grab my Lightning, Army of One deck, constructed around the Final Fantasy 13 character, so I can attack people for absurdly high amounts of damage. Maybe my Godzilla deck will engage in glorious combat against my friends’ decks led by characters from Dracula or Warhammer 40K. Would Eowyn from Lord of the Rings be a better match-up against the forces of the Imperium?

It’s a double-edged sword, this impulse toward crossovers. And it’s happening in games far beyond Magic: The Gathering.

Overwatch featured skins from Persona 5 in September, Halo armor and weapons showed up in Helldivers 2, and edgy looter shooter Borderlands 4 is showing up in… golf game PGA Tour 2K25. The crossover crown lies eternally with Fortnite, thanks to its never-ending influx of skins from games, movies, comics and real-life celebrities — leading players using the Sabrina Carpenter skin to stop shooting each other and, say, hold impromptu concerts instead.

When the elements fit each other are handled with care, it’s a fun way for fans to engage with multiple interests simultaneously. But when it feels carelessly thrown-together or when the elements don’t mesh, it can feel like a cash grab that hollows out the original property. And what works for one player might feel egregious or immersion-breaking to another. 

“Am I the problem?” I ask myself, as I work on a fourth Magic deck built around a Final Fantasy character, after spending hundreds of dollars on cards and accessories from the set. 

I do realize that the money I spent on the release event and weekly drafts screamed to Hasbro, “It’s working!” At the same time, playing with cards from that Final Fantasy set was also the most fun I’ve had with Magic in several years. 

Corporations betting big on brand crossovers feels like the unavoidable consequence of a world in which players look more and more for customization and ways to show off their personalities and interests, which dovetails with companies looking for lucrative ways to attract new players and increase revenue in ongoing games. Is other media filtering into popular games about the joy of including familiar faces, or does it turn characters into digital bumper stickers, starved of their identity from their original context? 

The answer, like it or not, is both. 

Money is a big part of the motivation, but expanding reach and offering customization also factor in

Blending different properties together generally requires an intense collaboration between the property owners and the game inviting the crossover. So what makes these gaming collaborations worth it for those parties? 

There’s a financial incentive, to be certain, as Hasbro has made astonishingly clear. In its second-quarter 2025 earnings call, CEO Chris Cocks noted that Magic: The Gathering’s Final Fantasy set made $200 million in revenue in one day, while it took the Lord of the Rings set six months to hit that milestone. To put those two collaborations in the context of original Magic: The Gathering sets, the bestselling Magic set before Lord of the Rings was Modern Horizons, which made $200 million over two years. 

Admittedly, $200 million in 24 hours is performance that Magic: The Gathering will likely struggle to replicate, even with the overabundance of outside properties coming next year: Teenage Mutant Ninja Turtles, The Hobbit, Star Trek and Marvel. Still, Cocks said the company feels good about the collaborations set to launch next year in terms of pleasing players and bringing in revenue. And Final Fantasy ultimately points to the financial power of a good gaming crossover, one where the properties are handled thoughtfully and intentionally (even if some of that intention is making the collaboration more collectible).

To better understand how and why these crossovers happen, I talked with some of the people powering these gaming collaborations. 

There were “a lot of clues” both internally and externally that Magic could support these kinds of crossovers in the game, said Aaron Forsythe, Magic: The Gathering’s vice president of research and development.

Sets like Lord of the Rings and Final Fantasy can also help funnel new players into a game that has been around since 1993.

“With Final Fantasy, we have seen a marked increase in play participation, especially among players who haven’t previously participated in our Organized Play programs,” said Rebecca Shepard, the vice president of franchise for Magic: The Gathering. That participation also extends after the launch of sets based on the other properties, which Magic brands Universes Beyond.

She noted that Universes Beyond releases also lead to increased interest in older products, demonstrating the crossovers’ ability to drive interest in the game’s original creations.

Magic’s designers have spent decades creating multiple in-game worlds or “planes” with their own lore, characters and mechanics. To a certain degree, crossovers are baked into its premise. 

But what about something with a considerably smaller scope, like the hero shooter Overwatch 2? The team-based game is set in nearish future Earth, where other Blizzard games like Diablo and Starcraft are minimal parts of the world as references and outfits. But aside from a small Lego crossover, other external properties were mostly only winked at… until the game introduced skins from the popular manga and anime One-Punch Man back in 2023.

The game’s collaborations started out as infrequent events, but now show up roughly every season.

The Overwatch team was nervous for its first collaboration and took a cautious approach, said Aimee Dennett, Overwatch’s associate director of product management. Devs wanted to ensure that heroes were still recognizably Overwatch characters while also maintaining the integrity of the game’s lore. The solution was described as “our characters are cosplaying,” meaning that the Overwatch heroes maintain the iconic parts of their visual identity, while incorporating elements that are recognizable as the characters from the crossover properties.

There are also internal motivations for these opportunities.

“We’ve found that it has such a positive effect on the team,” said Overwatch’s Art Director, Dion Rogers. People who work on the game are also fans of these properties, and the opportunity to design those crossovers can be a creative spark for the developers. 

Fortnite didn’t start the party, but it did invite basically everyone

Fortnite is the de facto example of crossovers in gaming. It represents an astonishing evolution of a concept that kicked off decades ago. 

Video game publishers were firmly protective of their properties to keep their games unique, but gaming website Giant Bomb asserts that crossovers started in earnest with 1992’s Battle Soccer, where Godzilla could take the pitch against giant mech Gundams and superheroes from Japanese TV. A few years later, Marvel’s X-Men faced off against Street Fighter characters in a move that would eventually spawn the Marvel vs. Capcom series of fighting games.

Crossovers ramped up in the 2000s with Sonic the Hedgehog and Solid Snake as the first two characters not owned by Nintendo to show up in Smash Bros. Brawl, a few years before horror movie villain Freddy Krueger first appeared in a Mortal Kombat game. Thematically, these all make some sense — but Fortnite took crossovers to another level. 

The crossovers started with the Infinity Gauntlet limited-time mode, where players could transform into Thanos, the villain of the 2019 film Avengers: Infinity War. It was quickly followed by the first Marvel-themed skins for Black Widow and Star-Lord that any player could wear. That kicked off a wave of Fortnite crossovers that would grow beyond Marvel to also include DC Comics, Star Wars, celebrities and various other games.

More have followed in Fortnite’s wake. The jump to include characters from other media besides video games has proven popular, with games like Mortal Kombat bringing in the villainous superhuman Homelander from The Boys, and the asymmetrical PVP horror game Dead by Daylight leaning heavily into killers and survivors from various games and movies — and also Nicolas Cage as himself, delivering some truly amazing voice lines.

Still, when it comes to bringing in everything from everywhere, nothing tops Fortnite, where crossover events feel less like guest stars and more like the first stop for major franchise promotion. And the cumulative results are, for lack of a better word, bonkers. Now a squad of Ariana Grande, Billie Eilish, Lady Gaga and Sabrina Carpenter can face off against a squad made up of Darth Vader, the Joker, Thanos and Mortal Kombat’s Sub-Zero… and then perform *NSYNC’s Bye Bye Bye dance on the villains’ corpses.

Epic Games, the makers of Fortnite, declined to comment for this story. 

Convenience and customization… at a cost

While crossovers with other properties help bring revenue and new players into games, they also risk alienating players whose primary interest is in their games’ original concepts and who may feel the crossovers move the game away from its identity.

“We listen and learn more than folks realize but at the same time, our goal of making Magic for everyone — because it is — can also frustrate our existing players,” said Shepard in response to a question about the feedback to Universes Beyond and the seemingly polarized responses online.

You can see that frustration in videos from prominent Magic creators, with titles like “The Problems With Universes Beyond — Even if You’re NOT a Hater” and “Half of Magic: The Gathering Will Not Be Magic: The Gathering.” The discussions in those videos touch on multiple elements, but center around the proportion of and execution of Universes Beyond sets and how those sets do or don’t gel with the rest of the game. 

That tension exists with most gaming crossovers. I wasn’t initially a fan of Overwatch’s move into collaborations. For me, the image of Doomfist in a yellow suit and flowing cape cheapened a character who’s supposed to be a surly big bad in the Overwatch universe. To me, it felt tonally mismatched with his identity, and I feared Overwatch feeling less like Overwatch as a result.

But the response I saw was largely positive. A change being celebrated doesn’t mean it’s necessarily good for the game, nor does outcry mean a change is bad. But there were clearly people who wanted the customization and expression of anime skins, highlighting the tension inherent in gaming collaborations like this.

Magic’s Aaron Forsythe acknowledged the competing interests, saying, “Players that have been with us for a while don’t feel the need for a change of this magnitude, and I appreciate how this hits them. But we’re doing this both because we want to grow the game — and we are — and because we think it’s another really fun way to enjoy it.”

For longstanding fans who have played the game for years, perhaps even decades, it may feel like the resources for the game’s original ideas are being diverted to fuel crossovers. 

There are degrees, though. In the case of Magic: The Gathering, one-time Secret Lair drops like Sonic the Hedgehog that mostly show up in casual multiplayer formats may not seem as disruptive. But over the course of next year, Magic will release four more sets based on outside properties, bringing the total to seven such sets in two years. More than any individual card or set, that density of outside properties might feel particularly unwelcome, contributing to the feeling that it’s just Fortnite now.

Everyone is here (and here to stay)

I think a lot of the response to crossovers comes down to two things: how well the concept fits and how good the execution is. Fortnite itself has become a conglomeration of various game types — from Battle Royale to Lego to Ballistic, festivals and Creative modes — so the game featuring skins from all kinds of movies, games and celebrities sort of fits into that “everything for everyone” idea. 

Something like Dead by Daylight is an example of using crossovers with a narrower focus, incorporating horror icons that fit its gameplay and lore. Resident Evil characters trying to escape from Halloween’s Michael Myers doesn’t make total sense, but there’s enough of an internal logic in the genres of slasher films and survival horror games for it to work. 

And, despite my initial reservations about Overwatch’s collaborations, I was immediately enthralled when I saw Kiriko’s Suki skin from Avatar: The Last Airbender. In addition to giving me a new outlet for my favorite character from the show, it just fit the visual identity and the concept of the Overwatch hero, a protector in her own right.

The people behind the games acknowledge how much that matters. “If we don’t do this right,” Overwatch’s Rogers told me, “the fans will call us out.” Players have their own ideas of what fits and what doesn’t, and they aren’t shy about voicing those feelings. But Rogers said that getting it right instead helps maintain the identity of the game’s heroes.

Similarly, Magic’s Shepard said one step in the process of evaluating potential crossovers is feeling out whether it feels like “an authentic relationship” for the game and its players. The challenge, however, is that each player’s mileage will vary when it comes to that authenticity. 

There’s no putting these crossovers back in the box, for better and worse. We’ll continue to have more options to play as our favorite characters across a variety of games. Right now, if I wanted to, I could fire up Street Fighter 6 and play a game as Chun-Li in the context of her original series. I could then swap over to Fortnite and run around sniping people as Chun-Li before logging into Overwatch and playing as Juno in her Chun-Li skin, healing people with a Martian mediblaster. And then over the weekend, I could play Magic: The Gathering with my friends and pull out a deck built around a Chun-Li character card.

For Chun-Li superfans, that’s great. At the same time, my Magic opponents may be sick of playing against characters from Stranger Things, Jurassic Park and Marvel, which might break the immersion of the game for them. 

The demand is there and the complaints are valid. Companies will follow the money. But each game’s developers have to find their own way of squaring the crossover — justifying (or not) how another creative world collides with theirs. 

For Overwatch’s Dennett, as the game grows and changes, so does the team’s philosophy about collaborations — because pushing the boundaries of what’s possible in the hero shooter sparks the imaginations of its player base. 

“It’s sort of a self-reinforcing cycle, where our players grow and change so much, and so do the types of collaborations, and the types of collaborations change, which grows and changes our players.”

Don’t miss any of our unbiased tech content and lab-based reviews. Add CNET as a preferred Google source.

Correction, Nov. 24: A previous version of this story misspelled the name of Hasbro CEO Chris Cocks.

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Technologies

U.S. diesel price tops $6 per gallon, a record high as Ukraine and Iran wars ripple through economy

U.S. diesel prices hit their highest level ever as fuel supply disruption stemming from the Ukraine and Iran wars lifts transportation costs.

U.S. diesel prices hit $6 per gallon on Friday for the first time ever, as fuel supply disruptions triggered by the Ukraine and Iran wars raises transportation costs across the entire economy.

Truckers and farmers are paying about 63% more to fill up their semis and tractors than they did at this time last year, according to data from AAA. The average price nationwide is now about $6.06 per gallon.

Prices are even higher in California, the biggest agriculture state in the U.S., at $7.98 per gallon.

Fuel costs are rising as crude oil prices have surged in response to a sharp escalation in fighting between the U.S. and Iran this month. U.S. crude oil futures topped $100 per barrel on Thursday for the first time since May. The contract has gained about 20% in September.

Diesel is the real lifeblood of the economy even though consumers tend to pay more attention to retail gasoline prices, said Bob McNally, president of Rapidan Energy, in an interview with CNBC’s “The Exchange” on Tuesday.

Higher diesel prices are passed down to consumers in what they pay for food, consumer goods and energy. Diesel fuels the trucks, trains and ships that bring goods to market. It powers the machinery that farmers use to plant and harvest food. And it heats homes and generates electricity in some cases.

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“It’s the more insidious, more costly, and more impactful fuel,” McNally said. “As we climb higher, it is a real concern.”

Diesel prices at these levels will be a “silent killer” for the economy, said Patrick De Haan, head of petroleum analysis at GasBuddy, in an interview with CNBC’s “Power Lunch” Tuesday.

Gasoline prices, meanwhile, have never been this high this late in the year, De Haan said. Prices at the pump hit a Labor Day record of $4.15 per gallon earlier this week. Americans are spending about $700 million more per day on gas and diesel than they did a year ago, the analyst said.

“There’s sticker shock there for consumers,” De Haan said.

Fuel costs are rising as the Iran and Ukraine wars have disrupted global supplies. Kyiv has pounded Russian refineries, forcing Moscow to ban diesel exports. Iran and its militant Houthi allies in Yemen have also hit the refineries of U.S. Gulf allies. Fuel exports through the Strait of Hormuz are constrained due to the Iranian attacks on tankers.

The wars in Eastern Europe and the Middle East have shut down refineries with about 5 million barrels per day of capacity, said Valero Chief Operating Officer Gary Simmons on the U.S. refiner’s July 30 earnings call.

The world has lost nearly 8% of its diesel supply with little spare refining capacity available to make up the shortfall, said Andy Lipow, president of Lipow Oil Associates, in a Wednesday note.

Rising diesel prices pose an “enormous challenge” for the Trump administration, said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a Sept. 4 interview with CNBC’s “Power Lunch.”

“U.S. refineries are running at 98% utilization rates — there is just no spare capacity,” Croft said.

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Technologies

Buffett’s confidence in troubled decade-old acquisition finally pays off

Warren Buffett has said he paid too much for Precision Castparts in 2016. Now its complex metal castings are in high demand.

(This is the Warren Buffett Watch newsletter, news and analysis on all things Warren Buffett and Berkshire Hathaway. You can sign up here to receive it every Friday evening in your inbox.)

Buffett’s confidence in troubled decade-old acquisition finally pays off

Six years ago, when Berkshire Hathaway took an $11 billion write-down of its $37.2 billion 2016 acquisition of Precision Castparts, Warren Buffett wrote in his annual letter to shareholders he had paid “too much” for the company, which makes “complex metal components and products.”

While it was a “fine company – the best in its business,” he had been “simply too optimistic” about its profit potential, a “miscalculation … laid bare” by the enormous downturn for the aerospace industry, Precision Castparts’ largest customers, amid the Covid pandemic.

In a CNBC interview when the deal was first announced, Buffett admitted it was “a very high multiple for us to pay,” but told shareholders at the 2016 meeting he had great confidence in Mark Donegan, the company’s CEO, both then and now, and the company’s long-term profit outlook.

It’s taken longer than he planned, but Buffett’s purchase is now looking pretty good.

As Reuters puts it, there is currently a shortage of the “complex” products Precision Castparts makes that are essential for engine turbine blades.

They’re also used in natural gas turbines, which are in demand to produce energy for artificial intelligence data centers.

This week, GE Aerospace announced it would pay $11.75 billion to acquire Consolidated Precision Products, one of the few companies that competes against Precision Castparts.

Barron’s calls that “pricey” at 26 times projected 2027 earnings before interest, taxes, depreciation, and amortization.

Using the same multiple, Barron’s estimates Precision Castparts is worth around $100 billion. That’s well above the potential value of $60 billion to $75 billion it cited in an article last month that said the unit “probably has become one of the more valuable divisions” of Berkshire.

It’s also nearly three times the 2016 purchase price.

In the Barron’s piece, Andrew Bary said Berkshire, and its share price, aren’t “getting much credit” for the subsidiary’s rising value, in part because CEO Greg Abel, like Buffett, doesn’t do analyst conference calls or investor events that could draw attention to the unit’s performance.

His recommendation: “Without Warren Buffett at the helm, Berkshire may have to start telling its story if it wants to attract a new generation of investors. This year’s trading action suggests that something may need to change.”

Berkshire bounces a bit as Wall Street sells off

Berkshire Hathaway shares managed a modest gain this week even as Wall Street’s major averages declined, a small departure from the 2026 “trading action” Bary cites.

Both the Class A and Class B shares gained almost 0.9% while the S&P 500 fell by 0.8%.

Until Friday’s bounce, that benchmark index, along with the Dow Industrials and the Nasdaq Composite, had dropped four days in a row as oil and bond yields moved higher.

Even with this week’s outperformance, Berkshire’s B shares still trail the S&P 500 by more than 10 percentage points so far this year.

Nebraska candidate moves to replace ad that included Buffett’s image

The campaign team for the Republican running in Nebraska’s 2nd Congressional District accelerated the deployment of a new campaign ad after Susie Buffett complained about a previous commercial that briefly included an image of her father, Warren Buffett.

In the ad, a picture of Buffett and his name appear on screen for roughly two seconds as candidate Brinker Harding says, “Here in Omaha, we know a thing or two about the stock market, some more than others. But we do it without insider information.”

He then goes on to highlight his call for a ban on Congressional stock trading, saying some lawmakers “trade on secrets you’ll never know,” as they “get rich” while “we barely get by.”

In a report that led its 10 PM CT newscast Wednesday evening, ABC affiliate KETV in Omaha reported Susie Buffett had asked Harding on Sept. 2 to remove the ad.

She told the station, “I think it’s worth it to say that Warren did not give Brinker his permission to use his face or name in his ad.

“It implies that my dad endorses him. He did not have permission to use it.”

The KETV report quoted Harding as saying in a statement, “In Nebraska, we work hard and support each other, and we do it honestly. Warren Buffett exemplifies that, and that was the point of my ad.”

The report said Harding did not comment on whether the ad would be taken down but noted “it does look like new ads from his campaign are beginning to run on some stations.”

A Harding campaign spokesperson told me the campaign did not think its ad implied a Buffett endorsement, but to be respectful to the Buffett family, it responded to her concern by accelerating the rollout of its next planned ad by several days, although its effort was hampered by the Labor Day weekend.

The commercial now running does not show or mention Buffett.

BUFFETT & BERKSHIRE AROUND THE INTERNET

Some links may require a subscription:

– Best’s News and Research Service: 2026 Best’s Rankings: Berkshire Hathaway Takes DPW Top Spot Among Accident & Health Lines

– Financial Times: The day Warren Buffett saved Salomon Brothers

HIGHLIGHTS FROM CNBC’S BUFFETT ARCHIVE

The effects of 9/11 on Berkshire and the insurance industry (2002)

Warren Buffett shares his thoughts on the 9/11 attacks and explains how Berkshire’s insurance companies have started taking terrorism into account when writing policies.

AUDIENCE MEMBER: I know you lost a lot of money as a result of 9/11. But I would like to know how 9/11 changed your life and your investment strategy?

WARREN BUFFETT: It made everybody, I think, in the country aware, I mean, we’ve gone through world wars and all of that, and essentially felt quite protected within these borders.

And I have been quite worried about — Charlie can attest to — you know, the possibility, particularly of some kind of nuclear device in this country, by — probably more likely by terrorists than by some, at least, declared act of war by another state.

And 9/11 made everybody realize that as humans have not progressed, particularly, in terms of how they behave with each other over the years, they have progressed enormously in their ability to inflict damage on those they hate for one reason or another…

In terms of the business aspects of it, in your question, obviously the area at Berkshire that it effects most significantly, by miles, is insurance.

And prior to 9/11, even though we recognized that there could be huge monetary damages that flowed from the activities of what I would call deranged people, we hadn’t really written the contracts in such a way as to either get paid for taking that risk or to exclude the risk. In other words, we were throwing it in for nothing.

We had excluded risk for war. I mean, we knew that we’d seen what had happened in England in the 40s, and so we had taken account of something that some of us had seen with our own eyes, but we didn’t take account of something that we knew was possible, but we just hadn’t seen. And that’s, you know, that’s the human condition, to some degree.

Since September 11th, everybody in the insurance business recognizes that they had exposures that they weren’t charging for, and they either had to exclude those exposures or they had to charge for them.

We have written — first thing we had to do, of course, is we had lots of policies on the books that left us exposed to this, and most of those policies ran for a year, starting at different points. Those have run off to a great degree, but they’re not entirely run off.

The other thing we did was on new policies. We have sold a fair amount, quite a large amount, of terrorism insurance that excludes what we call NCB, nuclear, chemical, and biological, as well as fire following nuclear.

And, we can take a fair amount of exposure to that sort of terrorism, because it doesn’t — it won’t aggregate. It aggregated at the Twin Towers in a way that — World Trade Center — in a way that just about was as extreme as you could get for non-NCB-type activities.

I mean, that was a huge amount of damage done without nuclear, chemical, or biological.

But we can have tens of billions of dollars with NCB excluded throughout a greater New York area, or something, but we can’t have hundreds of billions of exposure that would be exposed, say, to, nuclear activities, because there an act or two, or three, coordinated, could cause damage that would destroy the insurance industry.

And if we had coverage on that, it would destroy us as well.

BERKSHIRE STOCK WATCH

Four weeks

Twelve months

BRK.A stock price: $766,000.00

BRK.B stock price: $510.37

BRK.B P/E (TTM): 12.83

Berkshire Cash as of June 30: $365.5 billion (Down 8.0% from March 31)

Excluding Rail Cash and Subtracting T-Bills Payable: $359.2 billion (Down 3.8% from March 31)

Berkshire repurchased $4.5 billion of its shares in Q2 2026.

BERKSHIRE’S TOP EQUITY HOLDINGS – Sep. 11, 2026

Berkshire’s top holdings of disclosed publicly traded stocks in the U.S. and Japan, by market value, based on the latest closing prices.

Holdings are as of June 30, 2026, as reported in Berkshire Hathaway’s 13F filing on August 14, 2026, except for:

– Mitsubishi, which is as of April 30, 2026

The full list of holdings and current market values is available from CNBC.com’s Berkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@cnbc.com. (Sorry, but we don’t forward questions or comments to Buffett himself.)

If you aren’t already subscribed to this newsletter, you can sign up here.

Also, Buffett’s annual letters to shareholders are highly recommended reading. There are collected here on Berkshire’s website.

— Alex Crippen, Editor, Warren Buffett Watch

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Technologies

Wall Street firm warns AI stock rally may be nearing its end: key reasons

Capital Economics says that while the S&P 500 may keep rising this year, the AI‑driven rally shows multiple bubble indicators and is expected to peak within months, with a projected decline to 6,500 by late 2027.

Various signs of a market bubble indicate that although the S&P 500’s rally can continue this year, its medium‑term outlook appears weak because the market has become overly frothy, according to Capital Economics.

James Reilly, senior market economist at Capital Economics, noted on Thursday that most indicators point to the AI equity rally being close to its end.

Since mid‑2023, Capital has been more optimistic than most about the stock market, viewing AI as a transformative technology.

The firm’s year‑end 2026 S&P 500 forecast has consistently exceeded consensus estimates.

Nevertheless, Capital maintains that the AI‑driven rally is a bubble destined to burst.

To identify a late‑stage bubble, Reilly examines eight metrics: valuations, earnings, index concentration, equity issuance, and foreign interest in U.S. stocks.

Several of these metrics are already at or near levels seen before past market peaks.

While earnings expectations appear aligned with a market top, measures such as volatility and leverage are somewhat less concerning.

Earnings are the most significant warning sign.

S&P 500 earnings growth expectations are hovering at levels only seen at the dot‑com bubble peak, and long‑term EPS forecasts have reached a record high.

Reilly argues that the tech sector’s heavy concentration of this growth means any weakness in tech earnings will heavily drag on the index.

Additional warning signals are also emerging.

Index concentration is approaching dot‑com era extremes, net equity issuance has turned positive, and foreign ownership of U.S. stocks is at a record level.

Reilly warns that another wave of IPOs and share sales could be especially significant, as past issuance booms have historically coincided with market peaks.

He adds that, based on history, the bubble’s end is likely just months away, not years.

Leverage measures are not yet alarming compared with other factors, though the analyst cautions they are moving in a concerning direction.

Volatility indicators resemble those of a mid‑stage bubble, but constituent‑level volatility is not as extreme as at the dot‑com bust’s end.

Reilly expects the S&P 500 to rise from roughly 7,650 now to about 8,250 by the end of 2026, but ultimately projects a decline to 6,500 by the end of 2027.

These projections imply an 8% gain this year and a 21% drop in 2027.

Most signs point to the AI equity rally being close to its conclusion, Capital Economics senior market economist James Reilly stated on Thursday in a note.

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