Financial advisors are confronting a familiar yet fraught question from clients: Is the technology stock surge a bubble, or is it a justified reflection of artificial intelligence-driven demand? The Nasdaq 100 climbed 10.6% in May, while the Nasdaq Composite rose 8.9%, outpacing the broader market for a second straight month. The gains were concentrated in semiconductor and AI-related names, pushing valuations to levels that invite scrutiny.
Matt Dmytryszyn, chief investment officer at Composition Wealth, argues that the large technology companies providing AI models and compute capacity will eventually need to demonstrate attractive returns on capital. He expects demand to moderate or decline at some point, but believes that inflection point remains at least a few years away. With elevated geopolitical risks and economic uncertainty, investors are gravitating toward sectors where they have greater conviction in the outlook over the next few years, Dmytryszyn said.
“A significant variable is how long elevated revenues and margins will persist, especially for semiconductor companies,” Dmytryszyn said. “We know there are shortages today and they are likely to continue into 2028. An open question remains whether there will be a refresh cycle that occurs as demand starts to level off.”
Victoria Greene, chief investment officer at G Squared Private Wealth, a partner firm of Sanctuary Wealth, takes a more sanguine view. She says the price action in AI infrastructure names like Nvidia and Micron Technology is less worrisome as long as fundamentals warrant it. Any revisions down or deceleration in growth, however, would be a signal that the market has gone too far. Greene expects AI enterprise spending to accelerate meaningfully in the second half of 2026 as actual adoption moves beyond chatbots and into full integration with business processes.
“The world is trending toward more chips and data, not less,” Greene said, adding that autonomous driving will also require the massive infrastructure buildout now underway. She is more cautious on gargantuan IPOs like SpaceX and Anthropic, warning of a “gold rush” market sentiment and index rule changes that may inflate valuations. Both have huge potential, she said, but their actual earnings do not justify the massive premiums yet.
Mike Serio, chief investment officer at Trilogy Financial, notes that few market participants can spot true bubbles with regularity, and confirmation only comes after the fact. He points to the Global Financial Crisis, where models predicted negative six-sigma events that should occur only twice per billion trials. The main question facing wealth managers, he says, is whether all the capital spending will pay off. The demand side can be reliably estimated, but profitability is harder to quantify in terms of timing and magnitude.
“What we do know is that some companies will emerge dominant,” Serio said, drawing a parallel to the internet revolution of the late 1990s. “For every Alphabet, there were many more Ask Jeeves and Netscapes.” Andrew Graham, founder and portfolio manager at Jackson Square Capital, also references the dotcom bubble, noting that profitability peaked in 1997 and deteriorated well before the boom ended. Today, corporate profit margins remain stable, with productivity growing and wage growth decelerating. Moreover, most capital expenditure financing today comes from free cash flow, with much less debt on balance sheets compared to the late 1990s.
Advisors are increasingly turning to systems-level investing strategies to navigate such uncertainty, as a recent study suggests benchmark-reliant approaches may risk obsolescence. Meanwhile, the surge in SpaceX shares—up 57% above their IPO price—highlights the speculative fervor surrounding AI and space-related companies. As the debate continues, advisors are urged to maintain a disciplined approach, balancing conviction with skepticism.
