Bubble trouble haunts the AI-driven US stock market

Eventually it will be transformational but, for now, the AI mania is running ahead of itself.

- Vikram Khanna

If you think the US stock market is a bubble, you're in distinguished company.

On Oct 14, Mr Jamie Dimon, the CEO of the world's largest bank JP Morgan, warned that a lot of assets “are entering bubble territory”.

The renowned forecaster and former chief economist at Merrill Lynch Gary Shilling, who predicted the US housing market’s collapse in 2008, recently told Business Insider that stocks could crash 30 per cent amid “extreme speculation” in financial markets.

Yale professor Robert Shiller, the 2013 Nobel Prize winner in economics, has drawn attention to the fact that the cyclically adjusted price-to-earnings ratio, a key measure of stock market valuation, which he created, currently stands at levels surpassed only by the ones that preceded the market crashes of 1929 and 2000.

Or take another objective indicator: the US stock market capitalisation ratio to GDP. As at Oct 23, 2025, this was approximately 220 per cent, an all-time high, significantly exceeding all previous peaks in American financial history, including just before the market crashes of 1929, 2000 and 2008. This measure is also known as the “Buffet indicator”, named after the legendary investor Warren Buffet, who described it as “probably the best single measure of where valuations stand at any given moment”.

If indeed the US stock market is a bubble, the main reason is investors’ fascination with tech stocks, and particularly those associated with artificial intelligence (AI). With the exception of Apple, which did not invest heavily in AI, these included the rest of the so-called “Magnificent Seven” technology stocks - Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla. These six companies have been the main drivers behind the rise of the US stock market, accounting for more than half of the gains in the S&P 500 since 2024.