Remember the dot-com era? People lost their minds calling it the biggest bubble in history—right up until the moment millionaires were minted left and right. Fast forward to today and I can almost hear the same chorus warming up about artificial intelligence. Only this time, some of the smartest minds on Wall Street are basically shrugging and saying: so what if it’s a bubble?
That blunt take caught my attention the other day, and honestly, it felt refreshing. After months of hand-wringing every time a major tech name dips 5%, hearing a major bank basically say “bubbles can be insanely profitable” was the splash of cold water the market conversation needed.
Yes, We’re Probably in a Bubble—And That’s Fine
Let’s just call it what it is. Valuation metrics in the AI complex have detached from what most old-school investors consider reasonable. Price-to-earnings ratios that would make a 1999 value manager choke on his coffee are now just… normal. The Nasdaq has ripped more than 22% higher this year alone and sits a stone’s throw from all-time highs. If that doesn’t scream late-stage mania to you, I’m not sure what does.
Yet according to global macro teams at some of the biggest banks, the absolute worst thing you can do right now is let that reality scare you out of the trade.
Bubbles are at first typically quite profitable. We therefore would not overstress the recent wobbles, as they are unlikely to herald the end of the bubble.
That’s the core message coming out of one of the most respected strategy desks on the Street. And you know what? History is completely on their side.
What History Actually Tells Us About Manias
Think back to every major market mania of the past century. Railroads in the 19th century. Radio stocks in the 1920s. Biotech in the 1980s. Internet in the late 1990s. Each time, the crowd eventually screamed “bubble!”—and each time the smartest money kept riding the trend until the music actually stopped.
The dot-com peak in March 2000 is the classic example everyone loves to cite. Sure, the Nasdaq crashed 78% over the next two and a half years. Brutal. But if you had sold at the first hint of “bubble” in, say, 1997 or 1998, you would have missed the final 100%+ leg higher that turned good returns into generational wealth.
In my experience covering markets, the people who make the real money aren’t the ones who call the top perfectly (basically impossible). They’re the ones disciplined enough to ride the primary trend and disciplined enough to have an exit plan when the music finally fades.
Why This AI Cycle Still Has Room to Run
Several powerful tailwinds suggest the current AI frenzy isn’t exhausting itself anytime soon.
- Corporate earnings in the sector continue to accelerate, not decelerate
- Capital expenditure on AI infrastructure is still in the early innings
- The Federal Reserve is actively engineering lower interest rates
- Liquidity conditions remain extraordinarily supportive
Perhaps the most interesting aspect is how strategists are now watching liquidity and technical signals more closely than traditional fundamental metrics to judge when the party might end. That’s a major tell. When the pros shift from worrying about P/E ratios to monitoring fund flows and momentum, you know we’re deep into the psychological phase of a bull market—and those phases can last far longer than anyone expects.
The Fed Is Handing Investors a Gift
Let’s not bury the lede here: the Federal Reserve is in full dovish mode. Markets are pricing in virtually 100% odds of another quarter-point cut at the December meeting, with more to follow in 2026. Lower rates act like rocket fuel for growth-sensitive sectors—especially technology.
Every time the Fed has embarked on an easing cycle over the past forty years, risk assets have screamed higher. The only two exceptions were when the economy was already deep in recession. Right now? We’re looking at that rare unicorn: a Fed-induced soft landing with inflation cooling and employment still solid. That combination has historically been absolute gold for equities.
Yes, There Are Risks (There Always Are)
Nobody’s saying this ends with champagne and confetti forever. Every cycle has its reckoning. Some of the more speculative corners of the AI trade—tiny companies with no revenue promising “the next ChatGPT”—will absolutely get obliterated when sentiment eventually flips.
Mid-term election years also tend to bring extra volatility. Since 1950, the S&P 500 has averaged significantly lower returns in years when Congress is up for grabs. Combine that with the possibility of profit-taking after two monster years, and 2026 could easily see some serious chop.
But choppiness isn’t the same as collapse. Some of the best opportunities come when the crowd panics over a 10-15% pullback while the primary trend remains firmly intact.
How to Position Yourself Right Now
If you believe the macro setup still favors growth—and I do—then staying invested in quality AI exposure makes sense. That doesn’t mean chasing every micro-cap hype story. It means owning the companies actually building the infrastructure and monetizing the technology today.
- The handful of hyperscalers pouring tens of billions into data centers
- The semiconductor leaders whose chips power every major model
- The cloud giants who control the pickaxes of this digital gold rush
These aren’t speculative lottery tickets. They’re businesses generating real cash flow, signing massive contracts, and still growing earnings at rates most industries to dream about.
Personally, I sleep a lot better owning those names through volatility than sitting on the sidelines trying to time the perfect re-entry. I’ve made that mistake before—it’s rarely worth it.
The Bottom Line
Look, nobody has a crystal ball. Maybe the AI complex rolls over tomorrow and this article ages like milk. But based on every historical precedent, every liquidity signal, and every macro tailwind right now, the path of least resistance still looks higher.
The strategists who study this for a living aren’t panicking. They’re telling clients to lean in—carefully, thoughtfully, but decisively. In a world where cash yields are about to get crushed by Fed cuts, sitting out one of the most powerful trends of our lifetime feels like the bigger risk.
So the next time someone breathlessly warns you that “AI is clearly a bubble,” maybe just smile and ask them one simple question:
Are you sure you want to be the one who steps off the train before it reaches the station?
Because history has a funny way of rewarding the people who stay seated just a little bit longer.
