The AI Boom: Are We in a Tech Bubble and How Should Investors Respond?

AI euphoria, market concentration, and a practical playbook for staying the course

Over the last two years, artificial intelligence breakthroughs, record corporate earnings, and enormous capital spending have powered U.S. markets to all-time highs. Technology giants such as Nvidia, Microsoft, and Alphabet now dominate global indices, and many investors are asking the same question:

Are we inflating a new tech bubble? And if so, how could that affect global markets and long-term investment plans?

Echoes of 2000 But Not a Carbon Copy

At first glance, many of today’s market dynamics look familiar:

• Historic concentration: The ten largest companies account for roughly 38% of the S&P 500, near modern records, with Nvidia alone close to 8%.
• Rich valuations: The Nasdaq 100 price-to-sales ratio is around 6.3, approaching dot-com era levels.
• Massive capital investment: Spending on AI infrastructure, including chips, data centers, and cloud capacity, is already in the hundreds of billions annually and could exceed several trillion by the end of the decade.

But this is not 1999 all over again. During the dot-com boom, many internet companies measured success by how many people visited their websites rather than by real earnings. Most had little revenue and no profits. Today’s leaders are very different. Companies like Nvidia, Microsoft, and Alphabet are generating substantial revenues and strong cash flow. Nvidia’s revenue more than doubled in 2025 to over 130 billion dollars, and the company continues to post record margins.

The result: while the setup contains bubble-like features such as extreme concentration, high multiples, and optimistic assumptions, the fundamental backdrop is far stronger than twenty-five years ago.

A U.S. Tech Crash Would Hit the Whole World

Because the U.S. now represents about two-thirds of global equity market capitalization, a major tech sell-off would ripple across virtually every market.

• Global index impact: As an illustration, if United States mega caps fell 30 to 40 percent, the hit to global equity value could be in the low double digits, given today’s United States share of world market capitalization.
• Supply chain shock: Slower AI investment would hurt chipmakers, utilities, real estate, and exporters in markets like Taiwan, Korea, Germany, and Japan.
• Macro fallout: A flight to safety could strengthen the U.S. dollar, tighten financial conditions, and pressure emerging markets.

Even regions with minimal direct technology exposure would feel the effects through index funds, investor sentiment, and reduced global growth.

How to Invest for the Long Term Without Trying to Time the Market?

Predicting bubbles is nearly impossible, but you do not need to in order to build long-term wealth. The key is designing a portfolio that can withstand volatility and capture growth across cycles.

1. Diversify Globally and Broadly

Avoid overconcentration in U.S. tech by balancing exposure across geographies, sectors, and investment styles. Include allocations to international developed and emerging markets, value stocks, and small and mid-cap equities.

2. Anchor With High-Quality Bonds

A strategic allocation to government and investment-grade fixed income provides stability and historically rallies during equity sell-offs, cushioning drawdowns.

3. Tilt Towards Value Stocks

When growth stocks dominate and valuations become stretched, value-oriented companies provide important balance. Value stocks have historically shown resilience during market corrections and can help smooth returns when investor enthusiasm shifts.

History offers a lesson: Following the dot-com peak in 2000, U.S. growth stocks declined by more than 60% while value stocks held up far better and even outperformed over the next decade. A measured tilt toward value can act as a stabilizer if today’s growth-heavy leaders stumble.

4. Stay Disciplined Through All Market Conditions

Set clear rules for rebalancing so you trim back what has grown too large and add to areas that have lagged. Continue investing regularly through both rising and falling markets if your cash flow allows. Review your plan annually to ensure it still matches your goals, risk tolerance, and income needs.

Remember: time in the market consistently beats timing the market.

Final Thoughts

There are parallels between today’s AI-fueled rally and the dot-com bubble. Valuations are stretched, expectations are sky high, and a small group of companies are driving most of the returns.

The crucial difference is that today’s technology giants are generating real profits, investing in real infrastructure, and reshaping the global economy in ways that extend far beyond software and advertising.

For long-term investors, that means one thing: stick to a globally diversified, multi-asset portfolio, rebalance regularly, and avoid the temptation to time the market. You do not need to predict the next bubble to achieve your goals. You just need to stay invested and disciplined through it.

Daley Wealth Management helps investors design resilient, diversified portfolios that are positioned for opportunity in an AI driven world. If you would like to discuss how to align your investments with both the risks and the possibilities of AI, our team is here to help.

 

---

 

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Richardson Wealth Limited is a member of Canadian Investor Protection Fund. Richardson Wealth is a trademark of James Richardson & Sons, Limited used under license