The question I’ve been getting more than any other lately is simple: Are we in a stock market bubble?

It’s a fair thing to ask. When you look at the size, strength, and swagger of today’s market leaders, it’s hard not to feel a sense of déjà vu. I lived through the tech bubble and collapse, and while there are similarities, this time feels different for a few reasons.

What’s similar? Besides just the sheer gains of many stocks, one way to measure the froth in today’s stock market is the concentration of top names. The top ten companies in the S&P 500 now make up more than 40% of the entire index—an even higher concentration than we saw at the peak of the dot-com era in 1999. Back then, Cisco and Microsoft were the twin stars of a speculative tech universe that would later collapse. Today, Apple, Microsoft, and Nvidia occupy that same rarefied air.

Valuations also look uncomfortably familiar. The Shiller CAPE ratio – essentially a long-term price-to-earnings gauge that smooths profits over ten years – sits near 40, just a few points below where it was before the tech wreck. And the Federal Reserve? It’s also dancing a familiar tune—tightening, pausing, and contemplating rate cuts, just as it did back when Alan Greenspan was warning about “irrational exuberance.”

So yes, the parallels are striking. But that’s where the similarities end—and where the real story begins.

From Eyeballs to Earnings

In 1999, investors were buying ideas. Today, they’re buying cash flow.

The top tech companies now generate roughly $429 billion in annual free cash flow—actual money, not hypothetical “eyeballs.” Apple alone produces more profit each year than the entire group of top ten companies did back then. Microsoft’s $70-plus billion in annual free cash flow dwarfs the $5-7 billion it earned at the height of the dot-com boom. Nvidia’s margins are above 50%, numbers that would’ve seemed like science fiction in 2000.

That profitability changes everything. It means today’s giants don’t just have massive valuations—they have the financial firepower to back them up. The years-long question has been how the tech giants might spend their huge and growing cash hoard. Instead of chasing acquisitions as many (including me) thought, they are plowing hundreds of billions into AI infrastructure. According to company filings and analyst estimates, Microsoft and Alphabet (Google) plan to each spend nearly $91 billion in capital expenditures in 2025. Amazon? Over $100 billion.

Altogether, the big five are investing more than half a trillion dollars in AI-related buildout between 2025 and 2026.

It’s an extraordinary number. But it’s also a risky one. Take the volatility of the past few weeks as an example. Meta (Facebook) dropped 11% in one day after reporting record-high revenues. Why? Investors were worried if estimates of future earnings growth were too high given the company’s aggressive investment into AI.

When Experience Meets Exuberance

Unlike the scrappy start-ups of 1999, today’s market leaders are established, mature businesses. The average company going public today is 14 years old—nearly triple the age of a typical IPO candidate from the late 1990s. These are proven enterprises with real products, real customers, and real profits.

And that maturity matters. The infrastructure that supports today’s digital economy isn’t theoretical—it’s the backbone of global commerce. Cloud computing, for example, is a $600-billion industry serving 94% of major enterprises. E-commerce represents over 16% of total U.S. retail sales, compared to less than 1% back in 1999. The demand for digital services isn’t a guess anymore; it’s embedded in how the world works.

Even if artificial intelligence doesn’t live up to its loftiest expectations, the data centers, chips, and networks being built to support it will still power the broader economy. Amazon’s AWS won’t vanish if generative AI growth slows—it will just expand more gradually. That’s a far cry from the unused “dark fiber” of the early 2000s.

The $560 Billion Question

Still, it’s fair to ask: what if everyone is wrong about AI?

AI will transform the global economy. The question is really what if the projections or speed of growth is off? If the world doesn’t need as much computing power, or not this fast, the stock valuation fallout could be painful. We saw a hint of this in the first quarter of 2025, when a Chinese company’s AI model performed just as well as other platforms without the expensive chips or the need for as much power. AI and power stocks saw double digit percentage losses in just a few hours.

The risk today isn’t company extinction—it’s overbuild. If the world ends up needing three major AI platforms instead of ten, we’ll see excess capacity and disappointing returns. Semiconductor firms, data-center REITs, and even energy producers betting on nonstop AI demand could all face growing pains.

But there’s an important difference this time: many of these companies can afford to be wrong.

In 2000, a slowdown meant bankruptcy. Today, it might mean a few years of stagnant returns. Microsoft has nearly $72 billion in annual free cash flow. Alphabet has almost $100 billion in net cash. Meta holds over $30 billion. That’s not fragile—it’s fortress balance-sheet strength.

Beyond Tech: Where the Next Leaders Could Emerge

If the AI buildout slows or investors lose patience with mega-cap tech valuations, that doesn’t mean opportunity disappears—it just rotates. History tells the story: when the tech bubble burst in 2000, entire sectors quietly thrived. From 2000 to 2002, energy stocks more than doubled as oil prices climbed. Utilities and consumer staples outperformed by simply doing what they always do—earning steady profits and paying reliable dividends. Even real estate and small-cap value stocks posted strong gains once capital flowed out of Silicon Valley and into the rest of the economy.

In short, investors might rediscover other parts of the market. The past few years have rewarded innovation and dominance; the next phase may reward discipline and diversification. While tech’s story isn’t over, the supporting cast could finally get a few lines in the script.

Quality vs. Concentration

That brings us back to the $25-trillion question: are we in a bubble?

Not in the traditional sense. What we have is an expensive market built on profitable foundations. The concentration at the top of the S&P 500 is unprecedented—but so is the quality of those companies. They dominate industries with massive cash generation and global reach.

That doesn’t mean they’re cheap, or that a correction can’t happen. It just means a 30% drop in Microsoft or Nvidia wouldn’t erase the technology revolution they’re driving. It would simply make the long-term opportunity more attractive.

The Bottom Line

Markets tend to overshoot—both on the way up and on the way down. The question for investors isn’t whether AI is overhyped, but whether it’s real enough to justify patience.

We’ve seen this movie before. After the dot-com bust, the internet still transformed the world—just on a slower, messier timeline than investors expected. The same will likely be true for AI. The technology will reshape industries, but the pace and profit distribution will surprise us.

So yes, there are echoes of 1999. But this isn’t a speculative mania built on dial-up dreams. It’s a market of profitable giants investing in a future they can afford to build.

That difference—between belief and balance sheet—may be what saves investors this time, even if it doesn’t save us from a few sleepless nights along the way.