Artificial intelligence has become one of the biggest drivers of the stock market, attracting billions of dollars in investment and pushing some of the world’s largest companies to new levels of growth. 

From semiconductor manufacturers to technology giants, businesses connected to AI are playing a major role in shaping the market in 2026. 

But as excitement around AI continues to grow, investors are asking an important question: Are we witnessing sustainable market growth, or could the AI boom eventually turn into another market bubble?

This isn’t just a conversation about technology stocks. It’s about understanding risk, protecting retirements, and making sure a portfolio is prepared for different market conditions. 

While AI presents significant opportunities, the growing concentration of investments in a relatively small number of companies raises questions about how much is too much exposure to a single trend.

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Is the AI Boom of 2026 Actually a Stock Market Bubble?

Whenever a particular industry dominates market headlines, comparisons to previous bubbles are almost inevitable. The dot-com bubble of the late 1990s and early 2000s is one of the most common examples investors bring up when discussing today’s AI-driven market.

However, a rising stock market doesn’t automatically mean a bubble is forming. 

One of the key factors to examine is whether company earnings are growing alongside stock prices. When stock prices rise significantly without corresponding improvements in business performance, valuations can become stretched. 

But when companies are generating stronger earnings, the market’s growth may have a different underlying foundation.

In the market data, we are not seeing the same valuation pattern that characterized the dot-com bubble.

Instead, the recent market expansion is earnings-driven, with corporate earnings growth helping support stock prices.

Strong earnings, sustainable business models, and reasonable valuations can provide a different picture from one driven primarily by speculation. 

At the same time, even a market supported by earnings can experience significant declines when expectations change.

How Strong Corporate Earnings Are Supporting the AI Market

The S&P 500 earnings growth expectations have increased substantially, with projected growth reaching approximately 26%, compared with an initial expectation of around 12% at the beginning of the year.

The market had risen by approximately 10% over the same time period.

When earnings grow faster than share prices, you are effectively paying less for each dollar of company earnings than you were previously.

Many major technology companies are experiencing this strong earnings growth, including Google, Microsoft, and Amazon. Nvidia has also had substantial revenue growth, which is as an example of how demand for AI infrastructure has translated into business performance.

However, strong earnings should not be viewed as a guarantee of future stock market returns. 

Other points of consideration include how much growth is already reflected in stock prices, whether companies can maintain their current performance, and what could happen if expectations begin to change.

The Growing AI Market Concentration Risk – What in Really Means 

Even if the AI boom is supported by real earnings growth, there is another concern that should not be overlooked: market concentration.

The S&P 500 is a market-capitalization-weighted index, meaning larger companies account for a greater share of its overall value. 

As a result, when a relatively small group of large technology companies experiences substantial growth, those companies can have an increasingly significant influence on the performance of the entire index.

Currently, the top 10 companies represent approximately 40% of the S&P 500, compared with around 26% during the dot-com era. 

This creates an important consideration for investors who believe they are diversified simply because they own an index fund or several different investment funds. 

Different funds can hold many of the same large companies, creating overlapping exposure that may not be immediately obvious.

For example, an investor could own an S&P 500 index fund, a technology-focused mutual fund, and a growth-oriented ETF. Although these investments may appear to offer exposure to different strategies, they could still have substantial holdings in the same AI-related companies.

The concern isn’t that these companies will necessarily perform poorly. It’s that a significant decline in a handful of large holdings could have an outsized effect on a portfolio that depends heavily on them.

Why AI Infrastructure Spending Is Becoming an Important Risk Factor

Another important issue discussed in the video was the amount of money major technology companies are investing in AI infrastructure.

Companies such as Google, Meta, and Amazon are spending heavily on data centers, computing infrastructure, chips, and other resources needed to support AI development. 

These investments are intended to support future growth, improve capabilities, and create new revenue opportunities.

However, the scale of this spending is becoming an important factor to monitor. Major hyperscalers’ combined AI-related capital expenditure had increased from approximately $450 billion to $500 billion in the prior year to nearly $1 trillion in 2026.

This raises concerns about how much of these companies’ free cash flow is being reinvested into AI infrastructure. 

When a company commits a substantial portion of its available cash to a particular growth strategy, it has less room to absorb unexpected setbacks without changing its investment plans.

This doesn’t automatically mean AI infrastructure spending is a problem. If these investments continue to generate strong returns, they could support significant long-term business growth. 

However, if demand slows, revenue expectations fall short, or the returns on these investments take longer to materialize, companies could face pressure.

It is key to understand that even successful companies can experience significant stock price volatility when expectations around future growth change.

What the Dot-Com Bubble Can Teach Us About Today’s AI Market

The dot-com bubble remains an important historical reference for understanding how market concentration and investor expectations can affect stock prices.

During the late 1990s, technology stocks attracted significant attention as the internet transformed the business landscape. 

Many companies experienced enormous increases in market value, but not all of them had the earnings or business fundamentals needed to support those valuations.

When the market eventually declined, those who were heavily concentrated in technology stocks faced substantial losses. 

The recovery also demonstrated that different parts of the market can perform very differently over time.

The reason we monitor concentration risk is to understand how portfolios might respond if leadership shifts away from the largest technology companies. 

Other parts of the market can become important sources of returns when previously dominant stocks lose momentum.

The lesson isn’t that AI will follow the exact same path as the internet boom. The two periods have different business conditions, earnings profiles, and investment dynamics. 

Instead, the comparison highlights why we should avoid assuming that the strongest-performing companies today will always lead the market.

Historical market cycles can provide useful context, but they cannot tell us exactly when a correction will happen or which investments will outperform next.

How We Are Managing AI Risks

Diversification is one of the most widely used approaches to managing investment risk. 

However, effective diversification involves more than simply owning a large number of stocks. 

It requires understanding how those investments behave, how much they overlap, and whether they depend on the same economic trends. In other words, what is the correlation. 

We have been gradually reducing direct exposure to AI-related companies while maintaining investments in areas that could still benefit from broader economic growth.

This includes reallocating capital toward companies in other sectors, including healthcare, energy, and consumer businesses. The objective is to maintain growth opportunities while reducing reliance on a single market theme.

This approach illustrates our risk management strategy.

A diversified portfolio in today’s environment should include exposure to:

• Technology companies with sustainable earnings and business fundamentals.
• Healthcare companies operating in different areas of the economy.
• Energy businesses with distinct growth and demand drivers.
• Consumer companies with established products and revenue streams.
• Value-oriented and dividend-paying stocks that provide different sources of investment exposure.

The appropriate allocation depends on individual goals, risk tolerance, time horizon, and financial circumstances. 

Diversification does not eliminate market risk or guarantee positive returns, but it can help reduce dependence on the performance of a narrow group of investments.

Why AI Market Volatility Matters More When You’re Near Retirement

For younger investors with a long investment horizon, market volatility may be something they have more time to navigate. 

But those who are approaching retirement or already relying on their portfolios for income may face a different set of challenges.

When retirement is approaching, a significant market decline can affect more than the value of an investment account. 

It can change how much income a portfolio can support, how long retirement savings may last, and whether someone needs to adjust their withdrawal strategy.

This is especially important when income is needed, which means needing to withdraw money during a market downturn. 

Selling investments after a substantial decline can make it more difficult for a portfolio to recover, particularly when withdrawals continue over time.

A portfolio heavily concentrated in volatile technology stocks could experience significant losses during a correction, even if the underlying companies eventually recover.

For someone who is still working and contributing to retirement savings, a downturn may present a different set of choices than it would for someone who has already retired and depends on those savings for everyday expenses.

This is why retirement planning should include more than estimating future returns. 

It should also consider how a portfolio may behave during unfavorable market conditions to manage unexpected losses and protect retirement income.

Finding Growth Opportunities Outside AI 

Reducing AI exposure does not necessarily mean sacrificing growth.

There are multiple companies, such as Johnson & Johnson, Merck, Amgen, and Starbucks that are contributing to our portfolio performance outside the direct AI trade.

In fact, within our growth and income portfolio, 16 stocks outside the AI exposure category have outperformed the S&P 500 this year. Together, those holdings represented approximately 24% of the portfolio.

The broader takeaway is that investment opportunities can exist across multiple industries, and a portfolio doesn’t necessarily need to depend on one dominant theme to participate in market growth.

What You Should Review in Your Portfolios 

With AI continuing to influence the market, you would benefit from taking a closer look at how your portfolios, outside of our oversight, are positioned.

This helps you understand where your risks may be concentrated.

A portfolio stress test reveals how different market scenarios might affect your investments and your retirement plan.

Final Thoughts: Managing Risk Without Missing Market Opportunities

The AI boom has created meaningful opportunities for investors, but it has also made portfolio concentration an increasingly important consideration. 

Strong earnings growth, significant infrastructure investment, and rising exposure to a small number of companies are all part of the current market.

The important question isn’t simply whether AI stocks will continue to rise or whether a bubble is about to burst. It’s whether your portfolio is positioned to handle different outcomes.

For those nearing retirement, portfolio positioning can carry additional weight because market losses may directly affect future income and financial flexibility.

Ultimately, successful investing isn’t just about capturing the upside when markets are performing well. It’s also about understanding the risks, preparing for uncertainty, and building a portfolio that reflects your individual needs, your retirement!

If you are concerned about market risk, then we should talk; it’s the right thing to do!