Is the AI boom a bubble waiting to pop? Here’s what history says

Core Viewpoint - The current AI-driven stock market rally raises questions about whether it represents a financial bubble, with historical context suggesting that over-investment is common during technological advancements [1][4]. Group 1: Market Performance - The S&P 500 Index increased by 16% in 2025, significantly driven by AI leaders such as Nvidia Corp., Alphabet Inc., Broadcom Inc., and Microsoft Corp. [2] - Major tech companies are projected to increase capital expenditures by 34%, totaling approximately $440 billion over the next year [2]. Group 2: Investment Commitments - OpenAI has pledged over $1 trillion for AI infrastructure, raising concerns due to its lack of profitability and the circular nature of its financial arrangements with publicly traded tech giants [3]. Group 3: Historical Context - Historical analysis indicates that technological advancements often lead to over-investment, as seen with railroads, electricity, and the internet, suggesting the current AI boom may follow a similar pattern [4]. - The average duration of equity bubbles since 1900 is just over two-and-a-half years, with an average peak-to-trough gain of 244% [7]. Group 4: Market Sentiment - Concerns are growing among investors regarding the sustainability of equity valuations, especially as the S&P 500 has recorded three consecutive years of double-digit gains [5]. - A significant selloff in AI stocks could severely impact the S&P 500, given that Nvidia, Microsoft, Alphabet, Amazon.com, Broadcom, and Meta Platforms comprise nearly 30% of the index [5].