Should You Worry About an AI Bubble in 2026? Evidence is Piling Up, and Here's What it Shows. | The Motley Fool

Investors always are on the lookout for the next big thing. And over the past few years, this has been artificial intelligence (AI). The technology has promised to transform processes and operations as well as spark game-changing discoveries -- and the idea is that all of this could lead to massive earnings growth across the corporate world. Some companies, such as Nvidia (NASDAQ: NVDA) and Amazon , already are generating billions of dollars in revenue thanks to AI. And that's why investors have piled into these players, driving the S&P 500 to what soon may be three straight double-digit annual gains. But in recent times, some investors have worried about the enormous spending levels at certain AI companies, as well as the high valuations of stocks. This has led to a pullback among AI stocks and other growth companies. Now, as you think of what's ahead in 2026, should you worry about an AI bubble? The evidence is piling up, and here's what it shows. Image source: Getty Images. The AI boom so far First, let's consider what's unfolded so far in this AI boom . Companies have understood that by applying AI to their operations, they may gain in efficiency or set themselves up to make new discoveries. This has prompted them to turn to sellers of AI products and services for the tools they need to harness the power of AI. Players like Nvidia sell the world's top chips, and cloud businesses from Amazon Web Services to Microsoft 's Azure offer these and other systems to customers. NASDAQ: NVDA Key Data Points Companies aiming to use AI also might turn to software players with platforms that allow them to apply the technology to their businesses -- Palantir Technologies (NASDAQ: PLTR), offering software that aggregates and analyzes data, is a perfect example of this. And then you'll find others, such as SoundHound AI , that specialize in developing one particular area of AI -- in this case, it's voice AI that can be used to take orders at a restaurant or for communications with your car. All of these companies, selling AI products and services, have seen explosive revenue growth, but they've also had to heavily invest to keep up with demand and continue innovating. Investors' big concern As mentioned, AI players across the board have seen their share prices soar in recent years due to optimism about AI-driven growth. But investors have started to worry that, in some cases, future earnings won't justify the spending and stock prices we're seeing today. The S&P 500 Shiller CAPE ratio , a measure of stock prices in relation to earnings over a 10-year period, has climbed to a high it's only reached once before throughout its history. And that other time was before the dot-com bubble burst. S&P 500 Shiller CAPE Ratio data by YCharts So, stocks clearly have become expensive, and this is something that happens before a bubble deflates. But before declaring that a bubble is here, it's important...

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