University of Kwazulu-Natal

The Ai Bubble Could Be Real Is It Time To Trade Stocks For Cash

Bonisiwe Shabane
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the ai bubble could be real is it time to trade stocks for cash

The stock market has been running high. Too high, some analysts say. A number of Wall Street observers warn the stock market may have entered “bubble” territory. It’s an analogy to the overhyped markets of 2008 and 1999, which crashed when the bubbles burst. Lately, there's talk of an AI bubble, a runup in the prices of tech stocks fueled by enthusiasm over artificial intelligence. Those fears partly explain why stocks have faltered in the second half of November, despite a string of strong earnings reports.

When investors fear stocks might sink, their thoughts might turn to pulling money from the market and parking it in cash: money market funds, Treasury bills, even a plain old savings account. Seesawing stock prices fuel their ennui. “A lot of my clients have been sort of panic-calling this week,” said Monica Dwyer, a certified financial planner in West Chester, Ohio, speaking to USA TODAY in October. Chipmaker Nvidia posted yet another blockbuster earnings report this month. The stock fell anyway, as many investors worry that the market is in the middle of an about-to-burst AI bubble. But for AI’s biggest believers, the report was just another sign that the industry’s train isn’t running out of steam anytime soon.

“Fears of an AI Bubble are way overstated in our view,” Wedbush analyst Dan Ives wrote in a note last week. The Nvidia earnings report “is another validation point for the AI Revolution and (in) our view we are in the Top of the 3rd inning of this AI game .” The possibility of an AI bubble has loomed over the tech industry and Wall Street for years, but worries have ramped up sharply this year. Massive AI infrastructure spending, a string of circular deals among a few key big tech companies and seemingly endless rhetoric about AI’s world-changing potential – with little profit to show for it – have... The U.S. economy has come to increasingly depend on the AI boom, despite risks.

Fears of an artificial intelligence bubble have rattled the stock market in recent weeks and set off concern among critics about a wider risk to the U.S. economy. A surge of AI spending accounted for roughly two-thirds of gross domestic product growth over the first half of 2025, JPMorgan Asset Management found, outpacing the contribution made by hundreds of millions of U.S. consumers. Many of the nation’s largest companies have poured funds into the chips and data centers necessary to operate AI. A central question looms over the fate of the technology and the trillions of dollars being spent to develop it: Will AI deliver the type of profits that could turn the product into a...

Proponents say a lag between the buildout of AI infrastructure and an onrush of gains is to be expected, pointing to a similar lull after the introduction of other watershed technologies, such as the... The widespread adoption of products like OpenAI’s ChatGPT has revealed a massive potential customer base, they add, noting AI firms have prioritized product development over profits. The generative AI boom grew even bigger this week when Open AI announced its latest multibillion-dollar chip deal, this time with Broadcom – sending its stock up 10%, CNBC reported. The agreement, along with pacts with AMD and Oracle, is one of many that’s pumping money into an AI bubble that looks like it could end much like the dot-com bust did -- sending... If such a value decimation began today, it would ultimately swipe $40 trillion from the Nasdaq’s market capitalization. Or will the Gen AI boom continue for decades?

Read on to learn how to tell which scenario is most likely. In March 2000, the dot-com bubble – which began with the 1995 initial public offering of Netscape – began bursting. The collapse subtracted $3.6 trillion from the Nasdaq’s market capitalization. As of October 2025, the financial markets are gripped by a pervasive and intensifying debate: are we witnessing the formation of an AI-driven stock market bubble? This question is not merely academic; it's prompting a critical re-evaluation of investment strategies, with a significant focus on whether investors should consider the seemingly conservative approach of hoarding cash. A blend of fervent optimism about artificial intelligence's transformative potential and growing apprehension over soaring valuations has created a volatile and uncertain landscape for market participants.

The current market sentiment, characterized by both aggressive investment in AI-related stocks and increasing caution, places investors at a crossroads. While the allure of continued gains from the AI boom is undeniable, the specter of a significant market correction looms large, forcing a difficult choice between capitalizing on potential upside and protecting against substantial... The speculation surrounding an "AI bubble" has reached a fever pitch, with a significant portion of the global financial community believing the market is either in or on the cusp of an AI-driven speculative... This concern isn't unfounded; an October 2025 poll by Bank of America Corp. (NYSE: BAC) revealed that a record 54% of global fund managers now consider AI stocks to be in a bubble, identifying it as the foremost "tail risk" globally. This figure represents a sharp increase from previous months, signaling escalating anxiety among institutional investors.

Another contemporary survey echoed this sentiment, with 33% of global fund managers pinpointing an "AI equity bubble" as the primary global risk. This growing apprehension is fueled by several factors, including the perceived overvaluation of AI-related companies. The S&P 500's forward price-to-earnings ratio has climbed to 23, and the Shiller price-to-earnings (CAPE) ratio has surged past 40 – a level not witnessed since the infamous dot-com crash, placing the market firmly... Prominent figures are also adding their voices to the chorus of caution; JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon has expressed concerns about "elevated asset prices" and has predicted a "serious market correction" within... Similarly, Ray Dalio of Bridgewater Associates noted in early 2025 that current AI investment levels bear a "very similar" resemblance to the dot-com bubble. Even OpenAI CEO Sam Altman conceded in August 2025 that AI constitutes a bubble, cautioning investors that "someone's gonna get burned" due to "overexcited" sentiment.

These warnings often draw parallels to the internet bubble of the late 1990s and early 2000s, particularly regarding the disproportionate market influence of a few dominant technology companies, often dubbed the "Magnificent Seven." These... The Cboe Volatility Index (VIX) has also seen a surge in October 2025, reflecting heightened market anxiety, further exacerbated by renewed worries about a potential US-China trade war. Nvidia CEO Jensen Huang delivers a keynote address at the Consumer Electronics Show (CES) in Las Vegas in January. Patrick T. Fallon/AFP via Getty Images hide caption Perhaps nobody embodies artificial intelligence mania quite like Jensen Huang, the chief executive of chip behemoth Nvidia, which has seen its value spike 300% in the last two years.

A frothy time for Huang, to be sure, which makes it all the more understandable why his first statement to investors on a recent earnings call was an attempt to deflate bubble fears. "There's been a lot of talk about an AI bubble," he told shareholders. "From our vantage point, we see something very different." Take in the AI bubble discourse and something becomes clear: Those who have the most to gain from artificial intelligence spending never slowing are proclaiming that critics who fret about an over-hyped investment frenzy... This is read by an automated voice. Please report any issues or inconsistencies here.

The artificial intelligence boom seems unstoppable, but a growing number of investors and other observers worry it could be a bubble about to burst. After skyrocketing more than 50% from April lows, the tech-heavy Nasdaq composite experienced a decline of close to 5% this month. Investors are concerned it could take longer than expected to see big profits from the trillions of dollars they’ve poured into technology’s next wave. Those who have been around long enough say some of the enthusiasm feels like the dot-com boom and bust of the turn of the century. Optimists say this time is different. Meta shares tumbles as investors compare its AI spending splurge to metaverse missteps

Profesor Agregado de Economia, Universitat de Barcelona Sergi Basco does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment. Universitat de Barcelona provides funding as a founding partner of The Conversation ES. Universitat de Barcelona provides funding as a member of The Conversation EUROPE. Booms and busts are a recurring feature of modern economics, but when an asset’s value becomes overinflated, a boom quickly becomes a bubble.

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