Fresh record highs have kept the AI investment story firmly in focus, but one question refuses to go away. Investors are still debating whether the recent surge reflects a lasting shift or the early signs of another market bubble.
Artificial intelligence has driven another powerful rally in U.S. stocks, but investors continue asking whether the market is entering another bubble similar to the dot-com era. According to BlackRock’s weekly commentary, the answer depends less on current valuations and more on whether AI can continue generating the strong earnings growth that markets now expect.
The case against an AI bubble
The world’s largest asset manager notes that S&P 500 earnings are forecast to grow 23% year over year during the second quarter, marking a seventh straight quarter of double-digit gains.
While the S&P 500‘s Shiller price-to-earnings ratio has climbed to around 40, near dot-com bubble levels, the 12-month forward P/E stands closer to 21 because earnings expectations have risen alongside stock prices.
BlackRock argues that calling AI a bubble assumes the technology will fail to deliver a lasting increase in productivity. Instead, it believes AI could create new long-term revenue streams, supported by still-elevated profit margins across companies involved in the AI supply chain.
Where BlackRock sees value
Rather than trying to predict which AI models or software platforms will dominate, BlackRock favors investing in the scarce resources every AI system requires. These include advanced chips, memory, electricity, and data center infrastructure, where strong demand and long-term investment provide greater earnings visibility.
Looking further ahead, the opportunity may stretch beyond today’s biggest technology companies. As AI moves into robotics, industrial automation, and other physical applications, smaller firms and infrastructure providers could also benefit. For now, BlackRock continues to favor U.S. equities while keeping its focus on businesses supplying the critical building blocks behind AI.
