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Is this New AI Index a Roadmap to Riches or a Tracker for the Next Bubble?

ended 20. January 2026

Morningstar’s new index is being sold as the ultimate way to see how the biggest AI companies are performing. On the surface, it looks smart: it mixes public companies (which have a real stock price) with private companies (which don’t). But when you peel back the layers, this index highlights a massive risk in the financial system that very few people are talking about.

We are effectively mixing fact with fiction. Public company prices are like checking your bank balance—the number is real and proven. Private company valuations, however, are more like estimating the price of your house based on what your neighbour says it might be worth in five years. This index relies on "Venture Capital math," where startups are valued on hype and future promises rather than the actual profit they make today.

The danger here is that this index gives legitimacy to these "imaginary" prices. We are seeing a "valuation gap"—where private investors think these AI companies are worth billions, but the public market (real investors) might disagree entirely when those companies finally try to sell shares. If we package these risky, unprofitable private bets into a shiny new index, are we helping investors, or are we just creating a "volatility tracker" for the next tech bubble?

Furthermore, this index tracks "Agentic AI"—software that makes its own decisions. That isn't just a new technology; it is a regulatory minefield. Investors looking at this index need to ask: are we tracking the future of the economy, or just watching a slow-motion car crash of overpriced hype?

We'd like your views:

  • Private companies essentially mark their own homework on valuations. Is it safe to trust an index built on unchecked data?
  • If the AI hype creates a bubble that bursts, will this index be the first thing to collapse?
  • "Pure Play" often means "unprofitable." Are we encouraging investors to bet on companies that burn cash rather than make it?
  • Is this index designed to help regular investors, or is it just a billboard to help early Venture Capitalists sell their shares at a high price?
  • Public companies must show their accounts every three months. Private AI firms don't. Is this index hiding bad debt behind good hype?

Morningstar Launches First Pure-Play Generative AI Index | Morningstar

Morningstar unveils first pure-play generative AI index | Money Marketing

5 responses from the Newspage community

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Rohit Parmar-MistryVerified
Founder at Pattrn Data
The "marking their own homework" analogy is the critical warning here. We are witnessing a dangerous financial experiment: blending audited public reality with private "Venture Capital math."

In my experience, "Pure Play" AI often translates to "pure cash burn." Public companies survive on profit; private startups survive on the promise of profit. By indexing these private valuations, we aren't measuring value creation; we are measuring hype cycles.

This looks suspiciously like an exit ramp for early investors. VCs need a way to validate inflated valuations before an IPO, and this index provides that legitimacy. But for the average investor, it is a trap. You are buying into a "black box" of unaudited tech and regulatory risks, especially with Agentic AI, which is a legal minefield waiting to explode.

If this index becomes a standard, we aren't just tracking the market; we are inflating the bubble. When the correction comes, it will be the retail investors left holding the bag.
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Mitali DeypurkaysthaVerified
AI Governance Strategist & CMO at AISensa
This index risks creating a pump-and-dump structure, not through bad actors, but through design.

By blending public share prices with private venture valuations, it mixes two different things: price discovery and narrative. Public markets price what is. Private valuations price what might be. When they are merged into a single index, speculation borrows the credibility of audited reality.

That can quietly pump momentum around AI companies whose valuations rest on future promises rather than present cash flow. When sentiment shifts, the dump does not land with early insiders. It lands with public markets and long-term investors who trusted the index signal.

This is not fraud. It is how bubbles form. The real question is whether this index helps investors see clearly, or simply helps hype move faster.
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Samuel Mather-HolgateVerified
Managing Director & IFA at Mather and Murray Financial
To call this speculative is an understatement. However, there is no moral concerns with the fund as it advertises itself honestly and with clear disclaimer on the risks. If the AI sector is to take off in a way that the most dovish investors think, then this fund could fly. However, if the sector is already overvalued this fund could be the first to sink.
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Kundan BhaduriVerified
Entrepreneur, Investor and Landlord at The Kushman Group
We are effectively mixing the audited reality of the stock market with the fairy tale mathematics of Venture Capital where startups are valued on the size of their dreams rather than their profits.

It s appears to be an exit ramp for early investors who need to validate their inflated bets before dumping them on the retail market. By legitimising these private valuations alongside blue chip stocks Morningstar is creating a dangerous veneer of respectability for companies that are currently burning cash faster than they can print code.
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Colette MasonVerified
AI Ethics Consultant at Clever Clogs AI
Tracking private and public AI firms together risks turning expectations into market signals that aren’t grounded in hard performance because this index blends speculative private valuations with real public prices. Private valuations often reflect hyped sentiment more than economic reality, and embedding them in an index can give a veneer of legitimacy to numbers that aren’t market-verified.

Indexes shape markets by influencing where capital flows, especially if products such as funds and ETFs get built off that benchmark. If an index blends speculative estimates with real prices, it risks amplifying volatility rather than clarifying underlying value. That’s especially concerning in AI, where hype cycles can spiral quickly and fundamentals matter less than headlines.

The wider risk is treating this as a proxy for durable economic value rather than a snapshot of investor beliefs about private and public AI valuations combined.