The S&P 500 notched fresh records last week, propelled by a tight cluster of AI darlings. Nvidia crossed $5 trillion in market value. Microsoft and Broadcom rode the wave. Yet strip away those names, and the index sits deep in the red. This lopsided advance has Wall Street split: boom or bust in waiting? Investing.com laid it bare on April 26. Since late February, amid Middle East flare-ups, 118 S&P 500 stocks plunged over 10%. Just 82 climbed that far—most lashed to AI. ‘The stock market’s recent climb to record highs is being powered by a narrow, AI-driven engine, masking a broader and deeper decline in the average equity,’ the report noted.
Geopolitical shocks hit hard. Rising input costs crushed agriculture and other sensitive sectors. Oil spiked. But AI names shrugged it off. Investors poured into anticipated blockbusters: Anthropic and OpenAI IPOs. Froth built fast. Data-center builds gobble cash now. Free cash flow from AI apps? That’s a late-decade bet. Bears invoke dot-com ghosts. ‘Picks-and-shovels’ suppliers then soared, then crashed. Bulls counter: AI’s scale dwarfs that era. Valuations look tame by 2000 standards.
And the frenzy reignited. The Wall Street Journal reported April 26 that signs of excess abound. Desperation for IPO access mirrors past manias. Everything hinges on AI’s staying power. Goldman Sachs’ Joseph Wilson highlighted a shift. The Magnificent Seven barely budged 2% year-to-date. Enablers stole the show: Intel up 119%, ARM 113%, STMicro 97%. Inference and edge computing demand CPUs now. GPUs dominated training. Power efficiency matters more. X posts from analysts like Neil Sethi echoed this April 25.
Nvidia rules. Shares hit $208. Michael Burry’s $187 million put bet at $110 sours. It needs a 47% drop by 2027 to pay. He likened it to pre-crash Cisco. Nvidia added $2.15 trillion since. Burry shuttered his fund last November. Now he pens a $39 Substack on the AI thesis. X buzz swirls. One trader warned of circular cash: Nvidia funds OpenAI, which buys Nvidia chips. Echoes dot-com name-slapping. Yahoo Finance tracked the saga April 26. Skeptics pile on. Capital Economics sees a 2026 pop from rates and inflation. Polymarket odds favor a burst by year-end, at 11%.
But profits flow. Corporate America minted cash. Tech earnings growth hits 48% this quarter, per WSJ April 27. Revenue jumps 28%. Tesla plans $25 billion capex. Musk chases AI robots. Meta, Microsoft slash jobs for AI shifts. Software quakes. Fears of ‘apocalypse’ trigger outflows. Vertical AI winners emerge; others lag, says another WSJ piece April 26. Computing power strains. AI guzzles energy. Rationing hits users.
History whispers caution. Bank of America polls tag AI bubble as top tail risk. S&P’s cyclically adjusted P/E nears 2000 peaks, LA Times noted in January. Yet leaders boast profits, low debt. Nasdaq up 130% since late 2022. Concentration extreme. Big Tech nears 30% S&P weight. X chatter frets: S&P’s an AI ETF now. Credit exposure at 15.4% tests if capex slows.
So where next? Inference phase looms 2026. Recurring revenue could kick in. Or overcapacity bites—50% data centers canceled, per Polymarket notes. Hyperscalers eye earnings. Burry waits. Markets stay irrational longer than most stay solvent. Timing kills. Early bears bleed. Late ones vanish. AI transforms. But at what price? The narrow engine hums. Cracks widen below.
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