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We are now three years into the AI boom, and understandably, many investors are asking: is this a bubble? My view is, not yet. There are pockets of froth in the market that warrant caution, but the core AI trade is not in bubble territory.
Bezos: A "Good Bubble"
At a conference in Italy last weekend, Jeff Bezos captured the moment well. If AI is in a bubble, he said, it is a "good bubble."
"This is kind of an industrial bubble as opposed to financial bubbles," Bezos explained. "When people get very excited as they are today about AI, every experiment gets funded, every company gets funded. Investors have a hard time in the middle of this excitement distinguishing between the good ideas and the bad ideas. That's also probably happening today. But it doesn't mean that anything that's happening isn't real. AI is real, it is going to change every industry."
He added: "There has never been a better time to be excited about the future. We are gifted to live in a moment in time where there are multiple golden ages going on."
Core AI Leaders: Shares Trade at a Premium but Not a Bubble
The market's core leadership currently lies in the infrastructure providers powering the AI buildout. Nvidia remains the undisputed leader in AI chips, while Vertiv dominates power and cooling systems for hyperscale data centers. Arista Networks commands the high-speed networking essential for AI clusters.
Yes, these stocks trade at elevated valuations, but that does not make them bubbles. Nvidia's GPUs are effectively the currency of AI, Vertiv's cooling solutions are critical to keeping clusters online, and Arista's networking gear ensures that data flows seamlessly across supercomputers. Together, these companies represent the backbone of the AI revolution.
Furthermore, the hyperscalers who are integrating the AI into digital tools and applications we use every day, are in a similar position. Elevated valuations, but certainly not bubble-status.
Some Stocks Are at Frothy Levels
That's not to say everything in AI is safe. There are clear signs of bubble-like behavior in certain speculative corners.
For example, Oklo Inc., a nuclear micro-reactor startup, has soared to a $20 billion valuation despite having no revenue. This kind of story echoes past bubbles, where capital chased every "next big thing" regardless of fundamentals. It doesn't mean companies like Oklo can't succeed, but it does highlight the importance of separating long-term leaders from speculative bets.
Stock Market Valuations in Context
Looking at the broader market, valuations remain elevated but not extreme. The S&P 500 trades at about 23x forward earnings, compared with its long-term median of ~17x. The Nasdaq 100 trades at about 27.5x, modestly above its historical median near 24x.
These numbers suggest we are above average, but nowhere near the nosebleed valuations of true bubbles. That said, it would not be surprising to see a 5–10% correction by year-end or in early 2026 as the market deflates some of the froth. Many traders will call that the top, but in reality, it will likely be a fantastic buying opportunity.
Importantly, any pullback would likely hit speculative names hardest, while leaders like Nvidia, Vertiv, and Arista Networks remain well-positioned to benefit from the next wave of data center investment.
Can Investors Still Buy AI Stocks?
The AI boom is still in its early innings. Speculative pockets will come and go, but the core buildout is real and durable. Not only is the AI boom a tailwind, but this market is supported by both fiscal and monetary liquidity, which is flowing abundantly and likely to increase.
With governments running stimulative policies and companies racing to scale AI infrastructure, liquidity will likely keep a bid under this market for at least the next year, and quite possibly longer.
As of right now, it does not seem that the broad market, or AI leaders are in a bubble, yet. Maybe it will progress into one, but according to Bezos, that may not even be a bad thing.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Nvidia, Vertiv, Arista Networks and Oklo
For Immediate Release
Chicago, IL – October 9, 2025– Today, Zacks Investment Ideas feature highlights Nvidia (NVDA - Free Report) , Vertiv (VRT - Free Report) , Arista Networks (ANET - Free Report) and Oklo Inc. (OKLO - Free Report)
Are AI Stocks in a Bubble?
We are now three years into the AI boom, and understandably, many investors are asking: is this a bubble? My view is, not yet. There are pockets of froth in the market that warrant caution, but the core AI trade is not in bubble territory.
Bezos: A "Good Bubble"
At a conference in Italy last weekend, Jeff Bezos captured the moment well. If AI is in a bubble, he said, it is a "good bubble."
"This is kind of an industrial bubble as opposed to financial bubbles," Bezos explained. "When people get very excited as they are today about AI, every experiment gets funded, every company gets funded. Investors have a hard time in the middle of this excitement distinguishing between the good ideas and the bad ideas. That's also probably happening today. But it doesn't mean that anything that's happening isn't real. AI is real, it is going to change every industry."
He added: "There has never been a better time to be excited about the future. We are gifted to live in a moment in time where there are multiple golden ages going on."
Core AI Leaders: Shares Trade at a Premium but Not a Bubble
The market's core leadership currently lies in the infrastructure providers powering the AI buildout. Nvidia remains the undisputed leader in AI chips, while Vertiv dominates power and cooling systems for hyperscale data centers. Arista Networks commands the high-speed networking essential for AI clusters.
Yes, these stocks trade at elevated valuations, but that does not make them bubbles. Nvidia's GPUs are effectively the currency of AI, Vertiv's cooling solutions are critical to keeping clusters online, and Arista's networking gear ensures that data flows seamlessly across supercomputers. Together, these companies represent the backbone of the AI revolution.
Furthermore, the hyperscalers who are integrating the AI into digital tools and applications we use every day, are in a similar position. Elevated valuations, but certainly not bubble-status.
Some Stocks Are at Frothy Levels
That's not to say everything in AI is safe. There are clear signs of bubble-like behavior in certain speculative corners.
For example, Oklo Inc., a nuclear micro-reactor startup, has soared to a $20 billion valuation despite having no revenue. This kind of story echoes past bubbles, where capital chased every "next big thing" regardless of fundamentals. It doesn't mean companies like Oklo can't succeed, but it does highlight the importance of separating long-term leaders from speculative bets.
Stock Market Valuations in Context
Looking at the broader market, valuations remain elevated but not extreme. The S&P 500 trades at about 23x forward earnings, compared with its long-term median of ~17x. The Nasdaq 100 trades at about 27.5x, modestly above its historical median near 24x.
These numbers suggest we are above average, but nowhere near the nosebleed valuations of true bubbles. That said, it would not be surprising to see a 5–10% correction by year-end or in early 2026 as the market deflates some of the froth. Many traders will call that the top, but in reality, it will likely be a fantastic buying opportunity.
Importantly, any pullback would likely hit speculative names hardest, while leaders like Nvidia, Vertiv, and Arista Networks remain well-positioned to benefit from the next wave of data center investment.
Can Investors Still Buy AI Stocks?
The AI boom is still in its early innings. Speculative pockets will come and go, but the core buildout is real and durable. Not only is the AI boom a tailwind, but this market is supported by both fiscal and monetary liquidity, which is flowing abundantly and likely to increase.
With governments running stimulative policies and companies racing to scale AI infrastructure, liquidity will likely keep a bid under this market for at least the next year, and quite possibly longer.
As of right now, it does not seem that the broad market, or AI leaders are in a bubble, yet. Maybe it will progress into one, but according to Bezos, that may not even be a bad thing.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Get all the details here >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.