With stocks near all-time highs, strategists are dismissing concerns about an AI bubble. At least for now.
The S&P 500 is on pace to end the year up more than 17%, helped by a 26% rise in technology stocks.
“I don't think it's a bubble at all, but we're definitely heading into one,” said Mary Ann Bartels, chief investment strategist at Sanctuary Wealth.
Bartels compared the current market to previous bubbles, such as the late 1920s and the dot-com bubble.
“We're tracking pretty much the same, and it's actually a little spooky how we're actually tracking that pattern,” she said. “We see a bubble emerging, but it probably won't end until 2029 or 2030.”
But for now, Sanctuary strategists predict that technology will continue to drive the market through the end of the decade. They will place the S&P 500 somewhere between 10,000 and 13,000 by 2030.
“That's why we're calling out 2026 without fear, because there's still a lot of upside in this market, especially in technology,” she said.
Part of the rise is due to semiconductor stocks. These once-commodity stocks have become growth stocks, and Nvidia has “fundamentally rewritten the trajectory of semiconductor chips.”
The AI chip giant has soared more than 40% so far this year, pushing its market capitalization to $4.6 trillion, making it the most valuable publicly traded company. NVIDIA stock rose on Friday after the company announced a $20 billion licensing deal with specialty chipmaker Groq.
The partnership was announced as the chip sector heats up, with Alphabet's Google making headlines with its special customer-facing chips called TPUs. Alphabet's stock price has increased about 65% since the beginning of the year.
UBS strategists also expect the AI boom and solid profit growth to support market growth in 2026.
“Forward price-to-earnings ratios are only slightly higher than at the beginning of the year, reinforcing the fact that earnings growth, not valuation bubbles, is driving the market rally,” strategists said last week.
UBS expects the S&P 500's earnings per share to rise about 10% year-on-year, pushing the index to 7,700 by the end of next year.
Veteran strategist Ed Yardeni also expects the index to reach 7,700 next year, giving his Roaring 2020s scenario a 60% chance. He cited tax incentives from the One Big Beautiful Bill passed this year and the AI boom, among other reasons.
In October, Goldman Sachs analysts argued that the stock market is not in a bubble because tech stocks are rising primarily due to actual growth rather than speculative bets. The company noted that while top-performing companies have strong balance sheets and the AI sector is still largely led by a few large players, most bubbles occur when popular sectors are flooded with new entrants.
