Retail investors fears of an “AI bubble” have faded sharply since peaking in August — a shift that some strategists say could signal that artificial intelligence stocks still have room to climb before the mania eventually bursts.
According to Google Trends data spanning the past three years, U.S. and global web searches for the term “AI bubble” hit their highest point on Aug. 20–21, far surpassing searches for phrases like “stock market bubble,” “AI boom,” and “crypto bubble.”
That surge in concern came after an MIT report found that 95% of companies investing between $30 billion and $40 billion in generative AI were seeing no returns. Around the same time, Meta paused hiring for its new AI division, and OpenAI’s long-anticipated ChatGPT-5 rollout underwhelmed investors.
Declining “AI bubble” interest could signal more upside
Deutsche Bank strategist Adrian Cox, who first flagged the drop in search interest, said bubble cycles tend to unfold in phases — not as straight lines. “Bubbles are not a neat linear process,” Cox wrote, noting that markets often continue to soar long after the term “bubble” becomes common.
He compared the current AI enthusiasm to the late stages of the 1990s dot-com boom, when the Nasdaq Composite doubled in the 12 months through October 1999 and nearly doubled again before crashing in March 2000. The index ultimately lost nearly 78% of its value by October 2002.
Cox also cited earlier speculative frenzies — from the British railway boom of the 1840s to the 18th-century South Sea bubble — as examples of how euphoria can persist before a sharp correction.
Strategists see room for AI rally to extend
Some Wall Street analysts believe that AI stocks could keep inflating before reality sets in. “We continue to think a bigger bubble will emerge from AI before it’s over,” wrote Bank of America’s Nitin Saksena, adding that valuation-focused investors may be drawn back in as prices rise further.
Investment firm GQG Partners echoed that sentiment, saying in a Sept. 11 post that while many big tech names still dominate, their “backward-looking quality” suggests risks are growing. “In our view, the consequences of the current AI boom could be worse than those of the dot-com era, as its scale — relative to the economy and the market — is far greater,” the firm said.
Investors urged to diversify
MRB Partners strategist Salvatore Ruscitti warned that investors face “twin risks” — ongoing AI exuberance and a highly concentrated U.S. equity market, where the top 10 S&P 500 stocks now represent more than 40% of total market capitalization.
Ruscitti recommended broader exposure across U.S. sectors and international markets, where risk-reward prospects appear more favorable.
Despite growing caution, strong earnings expectations and hopes for interest-rate cuts continue to fuel market gains. Major U.S. indexes, including the S&P 500, climbed to fresh record highs this week as traders piled into mega-cap tech and AI leaders that have driven much of the rally since April.
