AI Valuations in Asia Under Scrutiny as Bubble Fears Weigh on Tech Stocks

Asia's equity deals pipeline for artificial intelligence is expected to face heightened scrutiny in 2026 as concerns over an AI "bubble" begin to surface. Market participants and analysts are watching closely how firms like Datavault AI and C3.ai will perform as they attempt to convert large but uncontracted licensing deals into revenue. The year is shaping up as a key test for the sustainability of AI-driven valuations in the region.

Meanwhile, Datavault AI has reported strong momentum in its Q3 results, with management expressing high expectations for closing licensing and tokenization deals by FY26. However, analysts warn that any failure to convert these opportunities could prevent the company from meeting its $200 million revenue target for the year. The firm currently trades at an eye-catching 93.4x EV to sales, one of the highest in the tech sector according to Seeking Alpha.

C3.ai, another major player in the AI space, recently posted better-than-expected results in its Q2 FY26 earnings report. Despite a 20% decline in revenue year-on-year, the company managed to narrow its losses and raised its guidance for the coming quarters. Wedbush analysts have called the results a "good step in the right direction" but emphasize that the company still needs to demonstrate consistent execution under its new leadership according to Seeking Alpha.

Risks to the Outlook

The path to profitability for AI companies remains fraught with challenges. For Datavault, one major risk is the integration of its Acoustic Science and Data Science solutions into existing systems across multiple industry segments.

If adoption is slower than anticipated or implementation proves problematic, the company's revenue from recurring royalties could be limited according to Seeking Alpha.

C3.ai, meanwhile, faces a unique set of headwinds. These include a government shutdown that disrupted its federal business and the need to stabilize its sales reorganization under a new CEO. The firm's free cash flow remains negative, and its gross margin has declined to 54%, raising concerns about the company's ability to scale efficiently.

What This Means for Investors

For investors, the current environment is a mixed bag. On one hand, firms like Datavault and C3.ai are seen as having high long-term potential. Their elevated valuations reflect market confidence in the scalability of AI-driven licensing models. Companies such as Palantir and Veritone, which followed a similar trajectory in their early stages, once traded at triple-digit EV to sales multiples.

On the other hand, the market is beginning to question whether AI valuations are becoming disconnected from near-term fundamentals. Wedbush analysts suggest that while C3.ai is on the right path, it must prove its ability to execute consistently and regain investor confidence after a difficult start to the year according to Seeking Alpha. The firm's guidance for Q3 FY26 and full-year revenue has been tempered by these challenges.

Investors are also closely watching the broader AI equity market. The Dan Ives AI Revolution ETF (IVES), for instance, has drawn significant attention, raising more than $900 million since its June launch. However, some analysts argue that the fund may struggle to deliver long-term alpha given the crowded and volatile nature of the AI sector according to Seeking Alpha.

What Analysts Are Watching

Analysts are looking for signs of stabilization in AI stocks. For Datavault, the key metric will be the conversion of its licensing pipeline into actual revenue by mid-2026. For C3.ai, the focus is on the performance of its new sales engine and the ability to deliver consistent results across quarters.

Market observers are also keeping a close eye on broader economic factors, such as interest rates and inflation, which can influence investor sentiment toward high-growth tech stocks. The recent performance of AI-related companies like UiPath and Salesforce suggests that the sector is beginning to see more differentiation in outcomes-some are thriving while others struggle according to Barron's.

As 2026 unfolds, Asia's AI equity deals pipeline will remain a focal point for both investors and analysts. The coming months will likely determine whether the sector can sustain its current momentum or if a correction looms ahead.