If one theme has suffused the stock market in 2025, it might be this paradox: Investors know all about the AI bubble, but they’re buying AI stocks anyway.
In a new survey by The Motley Fool, 93% of investors with AI stocks said they plan to hold or expand those investments over the next year. Only 7% plan to decrease their AI holdings.
“I think most investors view AI as transformative technology, game-changing technology,” said Asit Sharma, a senior investment analyst at Motley Fool.
But talk of the AI bubble is everywhere.
The stock prices of the “Magnificent Seven” tech giants (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) grew by 698% between 2015 and 2024, compared with a 178% return for the S&P 500 as a whole, according to Motley Fool. Some market observers warn that outsized expectations about artificial intelligence have driven those gains.
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Largely because of the Magnificent Seven’s stupendous growth, the stock market is historically overvalued. In consumer terms, stocks are overpriced.
How big is the bubble? Consider a metric called the cyclically adjusted price-to-earnings ratio. It measures whether stocks are overvalued or undervalued. As of Dec. 23, the CAPE ratio for the S&P 500 stands at 40.59.
Historically, the only time the ratio ranged higher was at the peak of the dot-com bubble, in 1999-2000. That bubble eventually burst.
Despite the bubble talk, AI stocks have continued their ascent in 2025. Nvidia was up about 36% through Dec. 23. Alphabet was up about 66%.
Investors keep buying AI stocks even though many believe the stocks are historically overpriced.
In the Motley Fool survey, published Dec. 15, two-fifths of investors said they believe AI stock prices reflect a “speculative bubble,” rather than a “sustainable trend.” The survey reached 2,600 adults.
In another survey, the financial journalism site Investopedia found that two in three of its readers believe AI-related stocks are overvalued. That December survey reached 815 investors.
When Investopedia asked readers to pick one stock to own for the next decade, most of them named companies in the Magnificent Seven.
“Most of our readers in our survey feel like AI stocks and AI-related stocks are in a bubble,” said Caleb Silver, editor in chief of Investopedia. “But when we ask them what’s in their portfolio, it’s those same stocks.”
The AI paradox has investors torn. Some have sat on the sidelines, avoiding AI stocks for fear of a bubble, only to watch them soar. Others have invested heavily in AI, and now they’re looking to bail out.
“There are certainly people on both ends of the spectrum,” said Jonathan Swanburg, a certified financial planner in Houston. “On one side, you have performance-chasers that will look at their year-end statements and want to own more of the things that did the best. On the other, you will have people that are scared about the next crash and want to reduce exposure to the names that have had the most success.”
Runaway AI stock values presume that artificial intelligence will eventually generate prodigious revenue for the companies investing in the technology.
Naysayers contend that, to date, the payoff has yet to arrive. One influential 2025 report from MIT found that, for all the billions of dollars invested in Generative AI, 95% of the organizations involved “are getting zero return.”
Meanwhile, analysts predict AI companies will take on more than $1 trillion in cumulative debt to fund AI projects, money borrowed on the promise of speculative returns.
Arguments against an AI bubble focus on the robust revenue of tech giants. Nvidia, for example, reported record revenue of $57 billion in the third quarter of 2025.
Supporters of the Magnificent Seven note that their operations range far beyond AI. Amazon, for example, operates a vast online marketplace, among many other interests, in addition to its AI pursuits. Alphabet runs Google.
“If all of the AI momentum suddenly came to a stop in their businesses, they wouldn’t go anywhere,” Sharma said.
Analysts warn that ongoing AI jitters will seed volatility in AI stocks, bubble or not. Nvidia’s stock price has seesawed over the course of 2025.
If an AI bubble bursts in 2026 or beyond, investors can expect a big drop in some or all of their tech stocks.
When the dot-com bubble burst, in 2000, the tech-heavy Nasdaq ultimately lost more than three quarters of its value. Many dot-com companies went bust. Many big players survived, and their stocks eventually recovered.
The same scenario could play out with AI. The key, stock analysts say, is being ready to ride out a bubble.
“Investors, after being aware of this risk, are deciding to invest for the long term,” Sharma said. “They’re confident that the technology itself is going to produce value.”
This article originally appeared on USA TODAY: Most investors don’t care about the AI bubble