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Bubble problem: AI rally shows cracks as investors question risks

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Bubble problem: AI rally shows cracks as investors question risks

By Saqib Ahmed
Publication Date: 2025-11-21 15:35:00

  • The valuations of AI stocks are giving rise to bubble concerns given the sharp declines
  • The Buffett indicator signals overvaluation and exceeds the level of the dot-com bubble
  • Nasdaq’s AI rally reflects the early stages of the dot-com bubble, lacking overwhelming optimism
NEW YORK, Nov 21 (Reuters) – The biggest bout of volatility in U.S. stocks in months has revealed cracks in the artificial intelligence-related rally and raised questions about whether the market has been gripped by a speculative bubble that may burst.

Rising valuations of AI stocks this year have fueled fears that Wall Street could inflate another speculative bubble. Some of those fears came to the forefront after a stellar earnings report from AI pioneer Nvidia failed to rally the stock and the broader market.

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In recent days, investors have been paying close attention to emerging signs of cracks in the AI ​​investment narrative. Several high-profile AI stocks have seen sharp declines, and questions about when AI investments will translate into… are mounting.

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