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A Bubble in AI Stocks Again? Update April 27 2026

 

AI STOCKS    

 

We're Gonna be Rich! 

 

 

 

 

The manic buying of stocks in companies in the hottest sectors tends to lean towards what analysts call a stock bubble. We have all heard about and perhaps participated in stocks like housing in the mid 2000’s, the dotcom craze or a myriad of sectors where stocks seem to only go up in price.

All of these hot sectors eventually cool off, and the focus moves on to something else. Some of these bubbles end suddenly with horrific crashes and some just kind of fade away as interest wanes.

It’s safe to say that the Artificial Intelligence (AI) stocks are the latest craze. I have written about these stocks a few times here on Money Matters. I brought the craze to light close to a year ago, and as the stocks went higher and higher, warned about a possible bubble forming.

A few months back, I penned that AI stocks were reaching into the realm of ridiculous as far as valuations were concerned. Simply put, prices kept rising at a blistering pace and when that happens, bad things can follow.

The stocks did pull back a few times and have suffered significant down days on occasion only to be followed by eyepopping gains again.

More recently, a painful erosion in these stocks gave some investors the idea that the party was over and to get while the getting was good. It’s easy to see the ongoing pullback on some of the price charts of these securities. The original peak in prices occurred twice. The first peak hit its mark in late October and early November 2025, with a close rebound occurring around the start of February 2026. This February peak was followed by a notable haircut of prices of many of these AI stocks which lasted about seven weeks.

Starting in the beginning of April however, the party restarted, and what looked like a funeral in AI, turned into another rip-roaring rally. The uptrend has continued right up to the day I penned this latest AI musing (Saturday, April 25).

Looking at the most recent April run, the increases witnessed are again bordering on ridiculous. Don’t get me wrong. The rally started when a handful of AI companies posted stellar earnings in their latest reports. The earnings started what I call the bowling ball effect, where action in one company knocks the prices of others in the space higher as well.

But the caveat here is that stock prices are based on many metrics. One of these metrics being expected future earnings. When we look at the stock price, however, the price of the stock, compared to what these companies are expected to earn, it just doesn’t compute. At least in the metric that many analysts use to determine whether a stock is a good buy or not.

Without getting too technical, the price you pay for a stock is thought to be based on what the company will make and return to stockholders. This return will either be in cash or stock price appreciation. But there are reasonable return expectations and then there are ludicrous return expectations.

Summing it all up, whereas stock prices would normally be based on what a company will earn, when stock prices go so high where it would near be impossible to earn what would justify its stock price under normal circumstances, the stock price is just driven higher by the “next fool” theory.

Put simply, people buy the stock for no other reason than the assumption that someone else will pay more for stock later and therein will lie the profit.

Doing this is not investing. It’s speculative gambling.

And if I ever desire to do that, I will sit at a slot machine in Vegas and get a free drink to boot.

Like a slot machine, no doubt, some people will indeed make money at it. But for my retirement funds, I usually prefer to use a more traditional methodology.

“ This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services.  Email: news@moneymanagementradio.com.

 

 

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