Investors know about the AI bubble. They're buying AI stock anyway.

Core Viewpoint - The stock market in 2025 is characterized by a paradox where investors are aware of the AI bubble but continue to invest in AI stocks, with 93% of investors planning to hold or expand their AI investments over the next year [1]. Group 1: AI Stock Performance - The "Magnificent Seven" tech giants (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) saw stock prices grow by 698% from 2015 to 2024, significantly outperforming the S&P 500's 178% return during the same period [2]. - Despite concerns about an AI bubble, AI stocks have continued to rise in 2025, with Nvidia up approximately 36% and Alphabet up about 66% through December 23 [4]. Group 2: Investor Sentiment - A survey by Motley Fool indicated that two-fifths of investors believe AI stock prices reflect a "speculative bubble," while another survey by Investopedia found that two-thirds of its readers think AI-related stocks are overvalued [5][6]. - Investors are divided, with some avoiding AI stocks due to bubble fears while others have invested heavily and are now considering selling [8]. Group 3: Financial Metrics and Concerns - The cyclically adjusted price-to-earnings (CAPE) ratio for the S&P 500 was reported at 40.59 as of December 23, indicating a historically high valuation, comparable only to the dot-com bubble peak [3]. - A report from MIT highlighted that 95% of organizations investing in Generative AI are currently seeing no return on their investments, raising concerns about the sustainability of AI stock valuations [10]. Group 4: Company Fundamentals - Despite bubble concerns, tech giants like Nvidia reported record revenues, with Nvidia achieving $57 billion in revenue in the third quarter of 2025, showcasing strong fundamentals beyond just AI [11]. - Supporters of the Magnificent Seven argue that these companies have diversified operations that extend beyond AI, which could mitigate risks associated with a potential AI bubble burst [11].