Phone, laptop price shock in 2026? Zoho's Sridhar Vembu says AI boom is distorting markets

Zoho founder and chief scientist Sridhar Vembu has warned that the artificial intelligence investment boom could end like the telecom bubble of the late 1990s, even as the technology itself continues to grow.

Vembu said the sharp rise in prices of smartphones and laptops in 2026 was one sign of the impact of the AI investment boom.

"That is the AI investment boom, funded (ultimately) by the mother of all credit bubbles unleashed post-pandemic," he wrote on Tuesday.

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AI Boom Has Distorted Markets

According to Vembu, the boom has pushed up demand across several industries. These include electric power generation, transformers, diesel backup generators, cooling systems, memory, CPUs and GPUs.

He compared the current cycle with the telecom investment boom of 1995-2000.

Vembu said the underlying technology can be genuine and still lead to a market bubble. He pointed to high-speed optical fibre connections now reaching remote villages as an example.

"Yet that did not prevent most telecom equipment companies from going bankrupt in 2001-3," he wrote. "The AI credit boom will meet the same fate, and I actually do believe the technology will achieve its full potential."

He said the challenge was to remain positive about AI while avoiding excessive exposure to the investment boom around it.

"Staying positive on the tech while being careful to not lose one's shirt in the bubble unleashed by boosters of the same tech - that is the careful balancing act needed today," he wrote.

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Memory Costs Add To Pressure

Vembu also commented on a report saying memory prices had risen 500% in 12 months and were 10 times their lowest level.

"Memory prices, along with AI token prices, have made business very difficult. We have held back from raising prices, but it is becoming hard," he said.

He argued that rising memory costs could also force changes in how software is developed. "For a long time, programming languages were designed with the assumption that memory is "free". That era has now ended," Vembu wrote.

He said developers would need more memory-efficient programming languages and smarter compilers, including for AI applications. "Safety of code and productivity in writing code cannot come at the expense of memory bloat. That is my area of research."