By Robert E. Quittner, Jr. CFP® & CMFC™
Investment Advisor Representative
[email protected]
I hope everybody enjoyed their holidays, catching up with friends and family alike. While it was nice to take a short break mentally, the news cycle never stops. One topic that has been in the news for months is the possibility of an “AI Bubble.” When a topic like this stays in news feeds and on talk shows, I know it will come up in conversation. If I were to peg the number one question I was asked during November and December, I would say it was “Is the AI bubble going to burst?” And the news didn’t help things. Here are just a few of the headlines I saw in December:
- Nvidia insists it isn’t Enron, but its AI deals are testing investor faith.
- 12/28/25, The Guardian
- AI spending spree drives global tech debt issuance to record high.
- 12/22/25, Reuters
- Tech groups shift $120bn of AI data centre debt off balance sheets.
- 12/24/25, Financial Times
- Will the AI Bubble Burst? Harvard Faculty Weigh In
- 12/12/25, The Harvard Crimson
While AI is permeating headlines these days, it isn’t new. Most historians point to the Dartmouth Summer Research Project on Artificial Intelligence as the birth of AI in 1956. That’s when a computer scientist by the name of John McCarthy coined the term “artificial intelligence.” The idea was bold: machines could be made to think, learn, and reason like humans.
A lot has transpired since 1956, but as far as we’re concerned, the big modern AI breakthrough was in 2012. This was when AlexNet, a type of computer program called a neural network, passed an image-recognition test that no other program had previously. This showed that, with lots of data and fast processors (GPUs), computers could learn to solve complex problems. From there, the race was on.
Starting in 2013, AI started being used quietly. Computers got much better at recognizing images and objects; speech recognition improved, making digital assistants more useful; machine translation became more accurate; and AI began working behind the scenes to help shape recommendations, ads, and fraud detection on some big-name retail sites. Then, from 2018 until now, AI went mainstream. No more behind-the-scenes work; AI became visible to the public. New models called transformers allowed computers to understand and generate language better; GPT-style language models could write fluent text; and ChatGPT and similar tools made AI easy for anyone to try, any time they wanted.
Why does AI feel so different today? Consumer-facing AI products are easy to interact with, can handle many tasks, and affect our daily lives—from phone assistants to newsletter article generation to even checking in at the airport.
Given this history, it’s not like AI burst onto the scene a few years ago. So why are some people worried about an AI bubble now? Here are a few common reasons:
- Record AI funding-AI startups raised about $150 billion in 2025—more than ever before. Also, some investors worry companies are being valued too highly.
- Questions about Nvidia-Some analysts are starting to question whether its rapid growth is sustainable.
- Rising debt-Tech companies are borrowing a lot of money to build AI systems and data centers, and, in many cases, debt is growing faster than profits.
- Market valuations-Investors worry that AI stocks may be overpriced.
- Growing skepticism-Some critics say the AI boom is being driven by too much optimism and hype.
While there are bubble concerns and some analysts are skeptical, others say that many opportunities exist. AI proponents state that, while it may be overhyped in the short term, it will be truly valuable over time. As with any industry, some companies will fail, but others will become successful. Here is a very brief overview of some of the opportunities afforded by AI:
- Task automation and cost reduction
- Better data analysis and more accurate predictions
- Automated customer support and interaction improvement
- Increased product, service, and experience customization
- Errors and risk protection, and
- The enablement of new products and capabilities
That covered, who are the main players driving AI development? Eight of the top companies are Nvidia, Microsoft, Google, Amazon, META, Apple, Tesla, and IBM. They are similar in that they each are profitable, have lots of available cash to invest in new technologies, and are long-term planners. These large and established corporations are different than many of the small startups that proliferated in the dot-com bubble in the 1990s.
While there are concerns about hype and stock valuations, AI continues to develop and be used across many industries. Technology itself remains an important part of the economy and has driven much of the stock market’s growth over the past decade.
As we always encourage clients to hold a well-diversified portfolio, owning stocks across many different sectors is a time-tested way to protect against market swings and popping bubbles. Some portfolios have become more tech-heavy than intended after three good years in the stock market. Now is a good time to take another look and make sure your portfolio is properly positioned and diversified.
The best time to act is now. Set up a meeting with Peter, Jeremy, Kyle, Nick, or myself if you aren’t sure about your market exposure.
Stay inside this weekend if you can and stay warm!
Rob