From billionaire hedge-fund titans like Ray Dalio and Michael Novogratz to countless other market watchers who aren’t household names, more and more professional investors are convinced the stock market is flirting with bubble conditions due to the artificial intelligence trade.

By Emily Forgash and Geoffrey Morgan References to the “dot-com bubble” in news articles soar every time the Nasdaq 100 hits fresh record highs, as it did earlier this month. All of the anxiety may help explain the selling in the market last week that sent the index down 5.5%.

Yet if this truly is a bubble, it’s proving more difficult for Wall Street investors to define.

Consider the simple price-to-earnings ratio. Rather than blowing out into obviously frothy levels, as was the case during the dot-com bubble a quarter-century ago, the forward P/Es of benchmark indexes like the S&P 500 and Nasdaq 100 have actually declined this year due to expectations of blockbuster earnings growth. In fact, a month before the market peaked in 2000, the five biggest tech stocks in the S&P 500 traded at an average forward P/E of about 65, compared with around 23 for the five biggest tech stocks today.

So what is it about this market that has so many people spotting a bubble? And — if they’re right — what will it take to pop it? Market pros point to a variety of symptoms of frothiness, from sky-high debt levels and unsustainable earnings growth expectations to vibes-based patterns of bubbles past.

“If you had to single out one element for a bubble, this might be it: The bubble becomes a public mania, a craze, and some people are getting ridiculously rich and anybody who’s not in it feels stupid and is kicking themselves,” said Howard Marks, co-chair of Oaktree Capital Management LP.

Marks — who presciently called the top of the dot-com market, and warned last year that he was “on bubble watch” — said the term bubble is “amorphous” but generally requires markets to measurably reach levels that defy investor judgment, while risk-taking and sentiment also disconnect from reality.

“A bubble is irrational exuberance, it’s imprudence,” he said by phone. “Obliviousness is another good word.”When analyzing his preferred bubble indicators these days, Marks isn’t convinced we’re there yet. While investors are showing classic signs of fear of missing out on a further rally in tech, the constant comparisons to past bubbles mean they’re not oblivious to the risk. When it comes to another signal — investor imprudence — the signals are also mixed. Traditional price-to-earning ratios do not look bubble-like at current levels, even if they are alarming when the multiple is based on the past ten years of earnings.

Investor Imprudence On the technical side, traders have flagged parallels to stock market crashes that followed past bubbles. They’ve cited metrics like extreme momentum into a period of record stock and bondissuance. Other concerning data include the wide dispersion among the best and worst-performing stocks within a sector and a lack of breadth in the market.

To Michael O’Rourke, chief market strategist at JonesTrading Institutional Services LLC, the decrease in the P/E ratios among Big Tech stocks is justified, given the huge amounts of debt they are taking on to build out AI infrastructure. He notes that multiples compress when companies lever up aggressively, which is especially concerning given the circularity of the investments.

“We’ve taken vendor financing to whole new levels” where chipmakers themselves need to subsidize the purchases of their products, O’Rourke said in an interview. “Otherwise these purchases would not happen.”One gauge alarming some investors is the cyclically adjusted price-to-earnings, or CAPE, which measures stock prices relative to the past 10 years of inflation-adjusted profits. The metric is often called the Shiller P/E, named after Yale economist Robert Shiller who published his book in March 2000, right as the market peaked.

DataTrek Research Co-founder Nicholas Colas called the measure the “scariest valuation chart making the rounds right now.”It currently shows a multiple of about 41, just shy of a record of 44 set in 1999.

Another area of concern is the acute concentration at the top of the stock market. Today, Nvidia Corp., Apple Inc. and Microsoft Corp. — the three largest US companies by market value — account for about 21% of the S&P 500, while in October 1999 it took almost 10 stocks to reach that level.

Nonetheless, the 250 percentage-point outperformance of the Nasdaq 100 relative to the S&P 500 in past 10 years is hard to ignore, even with all the technical warnings.

“Even if you’re kind of worried about tech, you can’t give it up. It almost seems stupid to do it because it always outperforms,” said Jim Paulsen, an investment industry veteran who now writes a newsletter.

Exuberance A major item on many bubble watchers’ checklists is investor sentiment, which has been far from exuberant both at the institution and retail level this year. Elevated inflation, midterm election uncertainty and the Iran war have caused traders to play defense at various points in 2026 as the Nasdaq 100 saw multiple pullbacks and a full 10% correction.

Still, there are signs that investors are feeling euphoric about the market opportunities the AI revolution presents, including corporate name changes that juice stock returns. Even the leader of one of the biggest beneficiaries of the boom has called out the euphoric vibes. Broadcom Inc.’s Chief Executive Officer Hock Tan said the AI boom has attracted investors who “have no clue what they are investing in” and are behaving like they’re in a casino.

Anecdotally, at least, another oft-cited warning sign of a bubble is when random encounters with service workers result in discussions about investments. Joseph Kennedy is famously quoted as saying he knew it was time to sell when his shoeshine boy was dishing out stock tips in 1929.

A similar recent encounter was noted by Sam Stovall, CFRA’s chief investment strategist, who said he was asked to print out stock reports on AI-related companies Intel Corp. and Cisco Systems Inc. while talking with a man running a newsstand in New York.

Obliviousness Regardless of which warning sign is being heeded, bubble talk on Wall Street is becoming more common as the current bull market enters its fifth year. During the second-quarter earnings season, corporate executives and analysts discussed parallels to the 2008 global financial crisis and the tech bubble during 15 different investor calls, including Goldman Sachs Group Inc., Analog Devices Inc. and Blackstone Inc., data compiled by Bloomberg Intelligence show.

Meanwhile, interest rates have spiked to levels that can spell trouble for previous market darlings. CoreWeave Inc. shares had nearly doubled in price between January and early May before last week’s rout sent it down year-to-date as its bond yields climb.

“Typically it’s something that goes wrong in the credit market that brings the cycle to an end,” said Brian Reynolds, chief market strategist at Reynolds Strategy LLC. “It’s when people get margin calls they can’t meet in the credit market, that’s when the real trouble starts.”Bubbles also pop when beliefs that technology can change the world translate to intense enthusiasm in the stock market. Investors “get overconfident and then they overpay. And that’s really what bubble thinking is. It’s not that AI is not going to change the world,” JonesTrading’s O’Rourke said.

In previous examples, including the rise of the Internet, the technology was wildly successful and transformative, and stock market gains led to massive increases in equity supply through IPOs and share offerings. But when earnings disappointed and interest rates rose, concentrated gains began to reverse.

Still, one telltale sign that Marks doesn’t currently see in the market is investor “obliviousness” to the risks. Indeed, everyone on Wall Street seems to be talking about a possible bubble.

“If enough people are cautiously wondering if there’s a bubble in a given area, then it makes absolute sense to think that if it is a bubble, it’s probably restrained,” Marks said.