Is AI the next bubble? Here's what investors need to know

Core Viewpoint - The discussion revolves around whether the current growth in AI-related stocks constitutes a bubble, with a focus on the sustainability of capital expenditure (capex) growth and its implications for future earnings [1][2]. Group 1: AI Stock Growth - AI-related stocks are experiencing supernormal growth due to a significant phase of capex buildout in the AI cycle [2]. - The strong earnings growth in these companies suggests that valuations are not as extended as they were during the dot-com bubble in 1999 [2]. Group 2: Future Capex and Earnings - There is a concern that companies may be over-earning, indicating that the current capex growth may eventually slow down as demand and energy supply reach capacity [3][4]. - Monitoring the pace of capex growth through 2026 will be crucial to understanding the sustainability of the bullish AI trend [4]. Group 3: Market Sentiment and Corrections - The current market sentiment does not reflect the extreme positioning typically seen in bubble scenarios, suggesting that there may still be room for growth [6][7]. - Historical patterns indicate that significant upward movements in stock prices are often followed by sharp corrections, which could happen if a melt-up occurs [5][7].