Wall Street has been mulling over fears of a bubble in the artificial intelligence (AI) space for quite some time. Analysts are divided in their views on whether AI investments can pay off within the required timeframe. Let’s find out what market experts are feeling about it.
Fears of a bubble in high-flying U.S. tech stocks may be premature — at least according to Goldman Sachs strategist Peter Oppenheimer, who believes that strong earnings, not speculation, are aiding the current rally, per Bloomberg, as quoted on Yahoo Finance.
He acknowledges that valuations are “stretched but not yet at levels consistent with historical bubbles.” The Nasdaq 100 now trades at 28x forward earnings, well above its 10-year average of 23, the above-mentioned source mentioned.
Oppenheimer believes that ripe valuations in both equity and credit markets reflect broader macro conditions — low rates, high global savings and a protracted economic cycle.
AI spending frenzy
While Wall Street remains largely bullish, growing caution is emerging around the massive capital pouring into AI infrastructure.
OpenAI, valued at $500 billion, lacks a profitable business history despite spending billions on data centers. It recently inked deals with NVIDIA, AMD and Oracle. Other tech players, including NVIDIA, Oracle, Amazon, Google, Meta, and Microsoft are all making similar billion-dollar AI bets.
Bubble or building phase?
Tech leaders are split. Jeff Bezos said we may indeed be witnessing an AI bubble, noting that “every company gets funded — good or bad” but he added that some of the quality investments will eventually reap rewards, as quoted on Yahoo Finance.
Goldman Sachs CEO David Solomon echoed the view, warning that rapid capital formation often gets ahead of real potential, the same Yahoo Finance article indicated.
Still, some experts, like Santa Clara University’s Ram Bala, argue the investments will pay off over the long term, as quoted on Yahoo Finance. AMD CEO Lisa Su said the AI boom is still in its nascent stage. Su sees it as the beginning of a 10-year kind of super-cycle, as quoted on the same Yahoo article.
Big capex = Big conviction?
While some are hesitant about the massive AI investments, some bulls expect Big Tech’s aggressive forward plans to stand out. In an environment where AI bubble fears are rampant, these companies are forging ahead. This shows their conviction in their investment plans.
Then again, investors need to be very choosy while picking tech stocks. Note that even AMD and OpenAI’s chip deal isn’t appearing to be a lucrative bet to Bernstein’s Stacy Rasgon. The analyst noted that the chipmaker’s processors don’t yet exist, and it has never handled an AI project of this size, as quoted on Yahoo Finance.
Time for too-big-to-fail tech stocks?
Big tech stocks are cash-rich. Alphabet has a cash flow/share of 9.47X against the S&P 500 value of 8.99X. Amazon has it at 10.57X, Microsoft has it at 18.29X, Apple’s ratio is 7.64X and Meta’s figure is as high as 30.73X. NVIDIA and Tesla’s values are rather low at 3.06X and 3.87X, respectively.
Debt/Equity ratio of Alphabet and Tesla are 0.07X versus the S&P 500 average of 0.58X. Amazon and Meta have the ratio at 0.15X. Microsoft has the debt-equity ratio at 0.12X. NVIDIA’s value is lucrative at 0.08X. Only Apple’s ratio stands at 1.25X — not very impressive.
Overall, the above-mentioned cash-position and the debt-equity ratios calls for a good balance sheet position. A strong balance sheet acts as a safety net for companies.
ETFs in focus
Given this, investors may want to invest in these stocks through exchange-traded funds (ETFs). We have highlighted some ETFs with the largest exposure to Big Tech.
Roundhill Magnificent Seven ETF (MAGS) – Up 5.6% Past Month (as of Oct. 8, 2025).
MicroSectors FANG+ ETN (FNGS) – Up 2.4% Past Month.
Vanguard Mega Cap Growth ETF (MGK) – Up 4.7% Past Month.
Invesco S&P 500 Top 50 ETF (XLG) – Up 4.2% Past Month.
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