Are AI Stocks in a Bubble?

With AI stocks experiencing price swings lately, charts like the one below have been circulating that compare the Nasdaq 100 (showing data from 2022 to the present) with historic bubbles.

Recent publications may want you to look at these similar patterns and feel that we're headed for a bubble. However, here's what these comparisons actually reveal, and what they overlook. 

What We're Really Looking At

A bubble forms when asset prices rise dramatically beyond what the underlying fundamentals can support. The challenge we face? Bubbles are usually only clear in hindsight. During the climb, people rationalize the valuations. After the fall, the warning signs can seem obvious.

If we look closer at this chart, we see that it rebases each bubble to start at 100, making them look similar. However, nearly every investment in history has periods that resemble this. Take almost any security, and you'll find dozens of segments with these same patterns. They're not all bubbles; they're normal market cycles. Cherry-picking a current time period and comparing it to historical disasters doesn't show that we're in a bubble. Could we be in a bubble right now? It's possible. But the same pattern-matching exercise can't tell us one way or the other. 

Timing Bubbles Backfires

When clients ask us about timing the market around bubble concerns, we walk through the risks we see. First, the existence of a bubble may be in doubt. Remember April 2025? Tariff concerns sent the S&P 500 down nearly 20 percent, then markets posted their best day since 2008 after concerns had eased. By June, the S&P and Nasdaq went on to hit all-time highs. 

Second, even if valuations are stretched, no one knows when the correction will come.

The Long Game

We build portfolios that reflect your goals, time horizon, and risk tolerance. We don't let the latest headlines drive decisions. Whether it's AI valuations, tariff concerns, or the next narrative that captures the media's attention, the core principles behind smart investing still apply.

Markets will always find new reasons to move. What matters is that we stay focused on what we can control: your strategy, timeline, and goals.