This article first appeared in The Edge Malaysia Weekly on October 6, 2025 - October 12, 2025

THEY don’t ring the bell at the top or at the bottom of the market,” is one of the oldest Wall Street adages. Given all the froth, including overvaluation and extreme concentration with the top 10 tech stocks making up nearly 35% of all capital expenditure, 38% of market capitalisation and 27% of listed firms’ earnings, it is not surprising that there is no shortage of people looking for signs of a market top these days.

Ironically, the people who are calling it a bubble are among those who are being accused of creating it. Two months ago, Sam Altman, CEO of the world’s largest tech start-up OpenAI which created ChatGPT, warned that investors were getting way “overexcited” about artificial intelligence. Last week, a private market transaction valued it at US$500 billion (RM2.1 trillion), or slightly more than the market cap of oil giant Exxon­Mobil Corp and video streaming pioneer Netflix Inc.

“Bubbles are among the oldest stories of capitalism,” notes Azeem Azhar, a British technology entrepreneur and head of research group Exponential View, and now a prominent technology Substack writer. Yet bubbles are not just financial phenomena; they are cultural artefacts, he says. From the Dutch Tulip Mania to the South Sea frenzy of the 1720s, roaring stock market of the 1920s, Japan’s property boom in the 1980s and the US subprime burst and housing crash that triggered the 2008 global financial crisis, Azeem points out that bubbles are really a tale of greed and folly. “Bubbles become stories we tell ourselves about the dangers of optimism.”

Are we in another tech bubble 25 years after the dotcom bust? And if indeed the latest run in AI-linked stocks is beginning to look like the dotcom bubble of 2000, when does it eventually pop? And, what’s next?

The latest bull run began exactly three years ago, when OpenAI unveiled ChatGPT, its maiden generative AI chatbot. Having fallen 24% in the first 10 months of 2022, the US market gauge S&P 500 began a sharp rebound. The index was up 26.3% in 2023, 25% last year and has gained 14.4% this year, or 15.9%, if you include reinvested dividends. Tech stocks have understandably done even better. The Nasdaq 100, which measures the top 100 US tech stocks, is up 18.4% this year and is 64% higher than post “Liberation Day” tariff lows in April. Indeed, the index is up 499% inclusive of dividends over the past 10 years. Shares of the “Magnificent Seven”, or the top seven US tech companies, are up 20.4% this year, or just over 21% inclusive of dividends, and have more than doubled since January last year.

While those are spectacular gains from the lows of 2022 when the market was weighed down by the fastest interest rate hike cycle in history, it is probably a stretch to describe the run as a “bubble”. If you look at the US stock market history all the way back to the crash of 1929, the average bull market lasts 59 months, with a return of 178%. The current bull market is in its 35th month with an 83% return. If history is any guide, the current bull run has some way to go, particularly in the context of the bull market of the 1990s that eventually morphed into a bubble in 2000. That bull market lasted exactly 10 years from April 1990 to March 2000, with total S&P 500 gains of about 420%.

How do we know if we are anywhere close to the point when a warning bell is in order? In late 1999, at the height of the dotcom bubble, billionaire investor Warren Buffett described what happens when a plain-vanilla bull market is on the verge of morphing into a real bubble.“Once a bull market gets underway, and once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits but simply to the fact that it seems a mistake to be out of stocks,” Buffett said five months before the bubble popped in March 2000.

Clearly, by the Sage of Omaha’s measure, we are not quite there yet. The 95-year-old chairman and CEO of Berkshire Hathaway, who retires at the end of December after 60 years at the helm of the Nebraska-based investment holding firm, believes bull markets end abruptly when the rally is powered by momentum, quite aside from stretched valuations and irrational exuberance. While valuations might be a tad stretched, particularly in parts of tech, Wall Street pundits point out that we are still not seeing anywhere near the sort of momentum or irrational exuberance that preceded the March 2000 bubble burst.

Here’s a short primer on how the world got to the dotcom bubble 25 years ago. Between September 1998 and January 1999, in the aftermath of the Asian financial crisis, the Russian currency and banking crisis, and the collapse of the hedge fund Long-Term Capital Management, where two Nobel laureates Robert Merton and Myron Scholes worked, the US Federal Reserve began slashing interest rates. That avalanche of liquidity helped fuel the dotcom bull run. But here is the thing: That bubble burst in March 2000 only after the Fed had raised interest rates by 175 basis points within 11 months, the third fastest rate hiking cycle on record. Sure, there was overvaluation, exuberance and momentum buying as everyone chased their favourite internet stock — from Pets.com to Webvan, eToys.com and free delivery site Kozmo, all of which lacked a viable business model, a decent revenue stream, a customer base or indeed even basic technology — but Fed hikes were the final nail that popped the bubble.

Here’s what’s happening right now. On Oct 1, shares of AI icon Nvidia Corp touched an all-time high of US$191, giving the chip behemoth a market cap of US$4.62 trillion — or over 50% more than the combined market value of all listed companies in Southeast Asia, which amounted to US$3.02 trillion at end-August. The S&P 500, the main US benchmark, also closed at an all-time high of 6,718, as did the Nasdaq 100, which closed at 603.79. At 6,718, the S&P 500 is trading at 24.7 times this year’s earnings. But we are close to the end of the year. Consensus S&P 500 earnings forecasts for 2026 are around US$305 per share so the market is trading at around 22 times next year’s earnings. The earnings growth forecast for next year is between 10% and 12%. The bull market might still look a tad pricey in its fourth year, but as the AI-powered growth continues, some of that froth is justified.

For one thing, there is a flood of liquidity that is about to become an avalanche as the US Fed resumes its interest rate cutting cycle this month. With the US government shutdown after President Donald Trump’s Republican Party failed to agree with the opposition Democrats on a spending bill, the Fed is now more likely than not to keep cutting rates because of its dual mandate of tackling unemployment and inflation. The Trump administration, which has drastically slashed the size of the government since it assumed office in January, has already hinted that it sees the shutdown as an opportunity to cut more employees, which will likely force the Fed to do more than it wants to despite signs that inflation may be creeping up again.

Will there be demand for Nvidia’s graphic processing units or GPUs that are used for AI training, or Broadcom Inc’s customised AI chips, or XPUs or eXtra processor units? Just last week, Citigroup raised its total capex forecast for hyperscalers, or ­giant cloud service providers Amazon Web Services, Microsoft Azure, Google Cloud and Oracle, to US$490 billion for 2026, and their total spending between 2026 and 2029 to a whopping US$2.8 trillion. It now expects Microsoft Azure to spend US$127 billion in 2026, or up 43% over the current year. The bank also raised its estimates for Oracle’s capex to US$57 billion during the next fiscal year beginning June 2026.

Bank of America reports that over the last two weeks, inflows into equity exchange traded funds or ETFs have been the second-highest ever. Just to put that into context, more than half of the new money pouring into US markets every month now goes into equity ETFs. Indeed, inflows into equities globally have kept up with the pace of equity flows in the US. Total flows into global equities, including the US, over the past two weeks topped US$88 billion or the third-highest inflow into stocks in history over a two-week period. Everyone, everywhere, seems to want a piece of the action. Investors believe the market is headed higher despite the fact that valuations are elevated and the market is being driven by 10 tech giants: the Magnificent Seven — Nvidia, software supremo Microsoft Corp, iPhone maker Apple Inc, search giant Google’s owner Alphabet Inc, e-commerce pioneer Amazon.com, electric vehicle maker maker Tesla Inc and Facebook and Instagram’s owner Meta Platform Inc — plus custom AI chip maker Broadcom, and software firms Oracle Corp and Palantir Technologies Inc, that have both emerged as formidable AI players.

The stock market run in recent weeks has begun to draw in novice investors eager to profit from a transformative new technology. Many have likened it to the meme stock mania of 2021 when young retail investors took a cue from Reddit’s Wall Street Bets and helped catapult massively shorted stocks like GameStop to new heights. To others, it is all about investors’ FOMO, or the fear of missing out. For their part, Wall Street investment banks, while warning of “overvaluation” in some parts of tech, are generally of the view that large-cap US tech stocks are still currently in a secular bull run driven by monetisation opportunities around generative AI. Nvidia, Microsoft, Alphabet and Meta have much better fundamentals than Cisco Systems Inc and Amazon had at the height of the dotcom bubble.

“Today’s market, particularly the tech sector, exhibits dotcom-era overvaluation, with lofty multiples, slower earnings growth and a weaker macroeconomic backdrop,” GQG Partners, a Florida-based investment firm headed by billionaire Indian investor Rajiv Jain, said in a report titled “Dotcom on Steroids” last month. “We believe today’s technology sector no longer represents forward-looking quality due to decelerating revenue growth, collapsing free cash flow and increasing competition.”

Since the 2008 financial crisis, the GQG report pointed out, the US tech sector has been the standout investment trade, defying the concerns of value investors of overly steep valuations. “While many initially underestimated the business quality, growth runway and long-term earnings power of big tech, these companies — led by visionary founders — evolved into monopolistic giants, delivering fast growth and robust profit margins,” it noted. “In a growth-starved, zero-interest-rate world that continuously drove capital toward secular growing compounders, this was the perfect set-up for massive outperformance.”

Now, however, the sector stands at a significant inflection point, “with investors seemingly making a one-way bet on the Al mania while appearing to ignore alarming fundamental issues”, GQG said. The momentum in growth-oriented segments of the market — including big tech and firms tied to the Al infrastructure buildout — could reverse at any moment, the report argued.

“Frothy, but not a bubble, yet,” notes Venu Krishna, a strategist for Barclays in New York. Even with the current annual US$400 billion AI infrastructure capex forecast to grow 30% per year over the next few years,demand for AI compute will still likely outstrip supply, he reckons. “The proliferation of advanced reasoning models and agents only raises the ceiling.”

Like the internet, AI is a truly disruptive technology. There will be pullbacks in this market as well, just like in every bull run. But what looks like dips to some investors are buying opportunities for others.

Assif Shameen is a technology and business writer based in North America 

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