Portfolio Management
Is This the End of the AI Bubble?
Bill Bonner recently raised a question that’s becoming hard for any investor to ignore:
Are today’s AI valuations starting to look uncomfortably familiar?
Bonner, a pioneer of the financial newsletter industry and a decades-long student of economic cycles, argues that today’s market may be entering familiar territory…
The market’s cyclically adjusted price-to-earnings ratio (CAPE), he notes, recently climbed near levels seen only once before – in 1999 – just before many high-flying tech leaders collapsed.
“Just look at what happened to the leading stocks of the dot-com bubble. Corning, JDS Uniphase, Lucent, Nortel, Ciena, Global Crossing, Level Three — all got whacked hard; many never recovered.”
For Bonner, the implication is straightforward: when valuations reach extremes, markets eventually reset.
“Stock prices are ‘mean reverting,’ which is to say that they always go back to a ‘normal’ range. And when they are extremely overvalued as they are today, they have a lot of ground to cover (losses!) to get back where they ought to be.”
So… is this the end of the AI bubble?
According to Chuck Carlson, CEO at Horizon Investment Services and WorthNet partner adviser, the important thing for investors to know is that not all AI stocks are alike…
“I think it’s dangerous to tar all AI stocks as being supremely overvalued,” Carlson says.
In his view, today’s AI landscape looks very different from the dot-com era Bonner references.
Back then, many companies carried big ideas but little profit.
Today’s dominant AI players, Carlson argues, are often highly profitable businesses with strong balance sheets and deep competitive moats.
“Many of the players in the dot-com blowup were not profitable, had suspect business models, and limited financial firepower. The big players in today’s AI have huge cash flows, massive profits, and strong moats.”
Some well-known AI names, he notes, trade at multiples that look reasonable when compared to companies outside the sector. Alphabet, for example, trades around 27 times forward earnings estimates, while Walmart trades closer to 41 times current-year earnings estimates.
And the AI story itself extends well beyond the handful of companies dominating headlines.
“The AI trade has many tentacles,” Carlson says. “It isn’t just about the hyperscalers.”
Chip manufacturers, data-center infrastructure firms, utilities, and engineering companies all sit inside the same ecosystem – and they don’t necessarily move together.
On top of that, bubbles don’t pop evenly, historically, notes Carlson. They separate winners from narratives.
So, on one side, Bonner sees familiar warning signs when valuations stretch too far. On the other, Carlson sees a market becoming more nuanced.
Between the two, there’s a clear takeaway: the AI story may not be over – but it may be changing…
AI is starting to behave like a normal sector… and not a single momentum trade.
Which makes selectivity more important than broad enthusiasm – especially as opportunities inside AI begin to diverge.
P.S. Big market themes like AI tend to produce both real winners and plenty of hype along the way.
If you’re interested in how advisers like Chuck Carlson evaluate sectors experiencing that kind of rapid change, WorthNet can connect readers with our small network of independent advisers, including Carlson and Horizon Investment Services, by clicking below.
Note that WorthNet itself does not provide advisory services and is not a client of Horizon Investment Services or the other advisers in our network. In full transparency, we’re compensated for promoting certain advisers and therefore have a financial incentive to recommend them, which creates a material conflict of interest.
That said, we’re thoughtful about which advisers we introduce to WorthNet readers, and we focus on firms whose experience and perspective we believe can add value alongside the investment research many readers already follow.
Charles B. Carlson, CFA®
CEO & Portfolio Manager of Horizon Investment Services
Investment Visionary, Seasoned Asset Allocator
Charles B. Carlson is a veteran investment adviser with over 25 years of experience in retirement planning, asset allocation, and portfolio management. He is CEO of Horizon Investment Services (CRD #110642), a proud member of the WorthNet partner adviser network.
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Last Revised: May 5, 2026
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