AI Stocks, Bubble Charts, and Keeping Perspective
As AI-related stocks experience periods of volatility, a number of charts have been circulating that compare the recent path of the Nasdaq 100 to past market bubbles. These charts often rebase each episode to a common starting point, creating visual similarities that naturally raise concern.
It’s understandable that these comparisons can feel unsettling. However, they require context.
A market bubble is typically defined as a period when prices rise well beyond what fundamentals can support—but bubbles are rarely identifiable with certainty in real time. During the advance, valuations are often supported by reasonable narratives. Only after a decline do warning signs appear obvious.
This is where pattern-based charts can be misleading. When different market periods are rebased to start at the same level, many normal market cycles begin to look alike. That resemblance alone does not indicate a bubble. In fact, most long-term investment charts contain multiple stretches that resemble well-known historical excesses, yet many of those periods resolved without dramatic reversals.
Could certain areas of the market be fully valued today? That’s possible. But visual pattern matching, on its own, doesn’t provide a reliable signal for decision-making.
What often poses a greater risk to investors is reacting too quickly. Recent history offers a reminder. In April 2025, tariff concerns drove the S&P 500 close to correction territory. Shortly afterward, markets rebounded sharply, and by June, both the S&P 500 and Nasdaq reached new all-time highs. Investors who exited based on fear alone often struggled to re-enter.
This is why our focus remains on disciplined portfolio construction rather than short-term market narratives. Even when valuations appear elevated, the timing of any correction is unpredictable.
Markets will always present new uncertainties—whether tied to AI, policy developments, or other emerging themes. Our role is to help clients stay anchored to what can be controlled: a well-defined strategy, an appropriate time horizon, and a portfolio aligned with long-term goals. Maintaining that discipline, especially during periods of heightened commentary, remains one of the most important drivers of long-term outcomes.