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Few topics have been as pervasive, or as polarising, as AI. Today, AI-related companies make up 40 per cent of the S&P 500.
As capital floods in and valuations climb, investors are torn between excitement and caution: Is this the beginning of lasting change, or a bubble in the making? It’s a fair concern and a risk we’re monitoring closely. For now, though, we do not see clear signs of a bubble. AI is not just lifting stock prices, it’s becoming a key engine of the US economy and a foundational driver of long-term productivity. To put it in perspective, AI-related investment has contributed more to US real economic growth than consumer spending in 2025.
Combined with strong earnings and solid forward-looking expectations for companies across the AI value chain, the current boom appears to be driven by genuine enthusiasm, not unchecked exuberance.
Tracking AI metrics
Of course, vigilance is warranted. How will we know if the boom is about to become a bust? We’re tracking several key metrics:
- AI adoption: There’s still plenty of room for growth. US adoption is up 60 per cent over the past year, but fewer than 10% of U.S. companies are actively using AI in production. The AI adoption cycle is just getting underway, and we anticipate the greatest productivity gains will materialise as AI moves beyond early adopters.
- Power and performance: The computing power needed to train cutting-edge AI models is rising exponentially, with performance gains accelerating on both sides of the Pacific. If future breakthroughs demand less power, it could disrupt market leaders who have invested heavily in infrastructure. Still, we believe that broader participation and improved efficiency will ultimately fuel wider adoption and drive long-term productivity.
- Capital runway: It’s reassuring that major hyperscalers have more profits than debt, and most hold surplus cash, but we will be watching for signs that credit is building. Broadly, capex also remains low compared to past overbuilding cycles (such as telecom before the dotcom crash or energy during the shale boom), and power and infrastructure constraints act as a natural check on spending — while also creating opportunities for the “picks and shovels” of the AI supply chain.
- Valuations & sentiment: Over the past three years, publicly traded AI stocks have actually seen their valuations (measured by forward P/E multiples) decline, while earnings per share estimates have more than doubled. That said, recent IPO performance suggests some signs of froth may be building, but we’re not seeing levels that warrant real concern yet.
While the rapid pace of spending may moderate from here, and pockets of exuberance may form, we don’t think the focus on AI is a fleeting trend. For instance, J.P. Morgan Asset Management’s 2026 Long-Term Capital Market Assumptions postulated that technology adoption, especially AI, is helping governments and corporations alike offset demographic headwinds and labour constraints. In other cases, AI is increasingly becoming a matter of national security. Altogether, we anticipate that the benefits will accrue beyond tech and broaden across the economy.
Where should investors find value? So far, public investors have mostly benefited from the infrastructure boom — semiconductors and cloud leaders have led the charge. However, the next wave of value creation may be with application and platform companies, many of which could remain private for years.
With firms staying private longer, investors should pay attention: the most significant AI breakthroughs are likely still on the horizon. Today, the median tech IPO happens when a company is 14 years old and pulling in $220m in revenue. Back in the 1990s, the average tech firm went public at just eight years old, with revenues of $44m in today’s terms.
As new opportunities come to the fore, they will likely require strategic capital to support long R&D cycles and scale adoption, making private market investors a natural stage for this stage of growth.
Strong momentum
To us, the momentum behind AI looks both strong and well-supported. While history shows markets can sometimes run ahead of technological progress, and this cycle could eventually be no exception, we don’t see bubble trouble for now. Provided that profitability and efficiency remain intact, the AI boom is shaping up to be a lasting engine of growth rather than a transient bubble.
As AI platforms and applications evolve, we see compelling opportunities emerging across the AI value chain, across sectors, and in both private and public markets.
The writer is a global investment strategist for J.P. Morgan Private Bank.
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