AI isn’t in a bubble—the cash (and the hype) are real, these analysts say

Core Viewpoint - The S&P 500 reached a new all-time high, primarily driven by technology stocks, despite warnings from the IMF and the Bank of England regarding a potential AI bubble and stock market correction [1] Group 1: AI Sector Growth - Analysts express skepticism about the sustainability of AI sector growth, suggesting a potential bubble, as indicated by rising gold prices which reflect investor hedging against tech stock declines [2] - Dan Ives from Wedbush predicts a robust earnings season for tech companies, estimating that major firms will spend $3 trillion on AI over the next three years [2] - Major tech companies like Amazon, Alphabet, and Microsoft are experiencing strong AI enterprise demand, with investments expected to exceed $400 billion by 2026, funded by operating cash flows rather than debt [3][4] Group 2: Market Valuation and Economic Impact - Concerns about stock overvaluation are noted, with a significant portion of S&P 500 gains attributed to a few tech companies, creating concentration risk [4] - The forward price-to-earnings ratio of the S&P 500 remains below levels seen during the dotcom era, suggesting that while large-cap stocks are expensive, they are not at extreme valuations [5] - The economic fundamentals of AI are considered more robust than during the dotcom era, with capital expenditures primarily funded by internal cash flows rather than debt [5] - Even if the AI sector experiences a downturn, it is projected to have a limited impact on the U.S. economy, with estimates suggesting a 0.3% point boost to GDP growth from AI capex [6]