As the artificial intelligence trade continues to push the stock market to new highs, investors are increasingly asking if we’re living through another financial bubble that’s destined to burst.
The answer isn’t so simple, at least according to history.
The S&P 500 Index jumped 16% in 2025, with AI winners Nvidia Corp., Alphabet Inc., Broadcom Inc. and Microsoft Corp. contributing the most. But at the same time, concerns are mounting about the hundreds of billions of dollars Big Tech has pledged to spend on AI infrastructure. Capital expenditures from Microsoft, Alphabet, Amazon.com Inc. and Meta Platforms Inc. are expected to rise 34% to roughly $440 billion combined over the next year, according to data compiled by Bloomberg.
Meanwhile, OpenAI has committed to spending more than $1 trillion on AI infrastructure, an eye-popping number for a closely held company that isn’t profitable. But perhaps even more troubling is the circular nature of many of its arrangements, in which investments and spending go back and forth between OpenAI and a few publicly traded tech giants.
Throughout history, over-investment has been a common theme when there’s a technological advancement that will transform society, according to Invesco chief global market strategist Brian Levitt, who pointed to the development of railroads, electricity and the internet. This time may be no different.
“At some point the infrastructure build may exceed what the economy will need over a short period of time,” he said. “But that doesn’t mean that the rail tracks weren’t finished or the internet didn’t become a thing, right?”
Still, with equity valuations creeping up and the S&P 500 just posting its third straight year of double-digit percentage gains, it makes sense that investors are growing concerned about how much upside is left and how much market value could be lost if AI doesn’t live up to the hype. Nvidia, Microsoft, Alphabet, Amazon.com, Broadcom and Meta Platforms account for almost 30% of the S&P 500, so an AI selloff would hit the index hard.
“A bubble likely crashes on a bear market,” said Gene Goldman, chief investment officer at Cetera Financial Group, who doesn’t believe AI stocks are in a bubble. “We just don’t see a bear market anytime soon.”
Here’s how today’s AI boom stacks up against previous market bubbles.
Pace, Length
One simple way of gaging whether the AI-fueled tech rally has gone too far or too fast is to compare it against past bull runs. Looking at 10 equity bubbles from around the world since 1900, they lasted just over two-and-a-half years on average with a trough-to-peak gain of 244%, according to research by Bank of America strategist Michael Hartnett.
By comparison, the AI-driven rally is in its third year, with the S&P 500 rising 79% since the end of 2022 and the tech-heavy Nasdaq 100 Index gaining 130%.
While it’s difficult to draw any conclusions from the data, Hartnett warns investors against fleeing the stock market even if they believe it’s in a bubble because the last stretch of the rally is typically the steepest, and missing out would be costly. One way to hedge is to buy cheap value plays like UK stocks and energy companies, he said.
Concentration
The S&P 500’s 10 biggest stocks now account for roughly 40% of the index, a level of concentration not seen since the 1960s. That has put some investors off, including Wall Street research veteran Ed Yardeni, who said in December that it no longer makes sense to recommend overweighting tech stocks.
Market historians argue that, while the concentration seems extreme relative to recent memory, there are precedents. Top stocks as a share of the US market were at similar levels in the 1930s and 1960s, according to London Business School professor Paul Marsh, who studied the past 125 years of global asset returns. In 1900, 63% of US market value was tied to railroad stocks, compared with 37% tied to technology at the end of 2024, Marsh said.
Fundamentals
Asset bubbles tend to be much harder to spot in real time than after the fact because fundamentals are usually at the center of the debate, and the metrics investors focus on can be fluid, according to TS Lombard economist Dario Perki