What if someone told you in July 2023 that AI would take the market to all-time highs — and keep it there?
It wasn’t a secret. It wasn’t a bold prediction born from a crystal ball. It was just a careful read of what was happening: a technology transformation every bit as significant as the internet, in its earliest innings, with the most profitable companies in human history sitting squarely in its path.
We wrote it down. Publicly. And the market delivered.
Since that July 2023 post — where we called AI the catalyst for the next multi-year bull market — the S&P 500 is up more than 70%. The Nasdaq has done considerably more. The names we positioned around? Multiples of that.
We mention this not to pound our chests, but because context matters. When we tell you what we think is coming next, you deserve to know our track record of thinking it through.
So — are we in a bubble?
No.
I get this question every time the market moves up hard. And after a rally of roughly 17% off the April lows to fresh all-time highs, I understand why it’s being asked again.
But nervous and overvalued are two different things.
A bubble doesn’t form because prices go up. A bubble forms when valuations lose contact with reality — when the price of something can no longer be justified by any reasonable estimate of future earnings. Dot-com companies with no revenue trading at 100x sales. Meme stocks with no business model. That’s a bubble.
The largest companies in the world today — NVIDIA, Microsoft, Apple, Alphabet — are generating the most profitable quarters in corporate history. These aren’t speculative bets. These are real businesses with real earnings, throwing off real cash, growing at rates most companies never dream of. When earnings justify the price, it’s not a bubble. It’s a bull market.
Are we extended?
Yes.
The market has had a massive run. Going from the April lows to all-time highs in roughly six weeks is not normal. Extended markets don’t need a reason to pause — they just need to breathe.
So yes, a 3–5% pullback at some point this summer would be completely healthy. Completely normal. That’s what bull markets do.
But here’s what matters: the direction remains higher. Three tailwinds are lining up that should keep any pullback shallow and the year-end target well above where we sit today.
Lower rates. The Fed has room to cut if the data cooperates. Any move toward rate reductions — even just the expectation of them — is jet fuel for growth stocks.
Lower oil. A resolution in the Middle East would take oil off the table as an inflation wildcard. Cheaper energy means lower input costs, lower consumer pain, and one less reason for the Fed to stay tight.
Earnings growth. This is the big one. Analysts are projecting roughly 13% year-over-year earnings growth for the S&P 500 this year. Wall Street’s median year-end target is now 7,650 — roughly 8% above current levels.
Pullbacks should be shallow. The market will most likely finish 2026 higher than where we are today.
Two Numbers From the Major AI Players That Tell the Whole Story
This is the part I really want you to sit with — because it’s the clearest argument against the bubble narrative, and the strongest case for why this market likely has further to go.
Let’s start with what a P/E ratio actually means, because this matters.
The price-to-earnings ratio — or P/E — is simply how much you’re paying for every dollar of profit a company earns. A P/E of 20 means you’re paying $20 for every $1 of annual earnings. Historically, the S&P 500 trades around 18–20x earnings. High-growth technology companies often command 30–40x or more, because investors are willing to pay a premium for faster growth.
Now here are the two numbers.
NVIDIA — the largest company the world has ever seen — is currently trading at roughly 17x forward earnings. Let that sink in. The company that is essentially the backbone of the entire AI revolution, with revenue growing triple digits year-over-year and returns on equity north of 100%, is trading at a below-market multiple relative to where technology companies have historically been valued. For context, NVIDIA’s 5-year average P/E is closer to 97x. Today? 17x. The earnings have grown so dramatically that even with the stock price near historic highs, the valuation has actually compressed.
Micron Technology (MU) has been one of the best-performing stocks in the market over the past year — up more than 800% — and its forward P/E sits at roughly 8x.Eight times earnings! For a company that makes the high-bandwidth memory chips that make AI processing possible, chips that are currently sold out through most of 2026. Analysts project Micron will earn somewhere north of $100 per share this fiscal year. If Micron were to trade at the same forward multiple as the average technology stock — call it 25–30x — you’d be looking at a price closer to $2,500–$3,000 per share.
These are not bubble valuations. These are companies growing into and past their prices.
Why This Matters for the Broader Market
Here’s something most investors don’t think about but should.
The S&P 500 and Nasdaq are not equal-weighted indexes. They are market-cap weighted — meaning the largest companies have the most influence over where the index goes. When NVIDIA, Microsoft, Apple, and Alphabet grind higher, they pull the entire index with them. The smaller companies in the index — the ones that may be struggling, or trading at higher valuations, or facing more headwinds — often get lifted along for the ride.
There’s an old saying: a rising tide lifts all boats.
In a market-cap weighted index, the AI giants are the ocean. And right now, the tide is still rising.
The Bottom Line
We called the AI boom early. We stayed convicted through the volatility. And we’re still bullish — not blindly, but with clear reasoning and a clear-eyed view of the risks.
Extended? Sure. A pause is probably overdue.
A bubble? No.
If you’re a current client, you’re positioned for what comes next. If you’ve been watching from the sidelines and wondering whether the window has closed — it hasn’t. But markets rarely wait for comfort.
Let’s talk.
— JC
Past performance is not indicative of future results. This post is for informational purposes only and does not constitute personalized investment advice. All investing involves risk, including loss of principal.