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Is the AI Boom a Bubble Waiting to Pop? Market, Tech & Options Breakdown

Unusual Whales

• 4 min read
Is the AI Boom a Bubble Waiting to Pop? Market, Tech & Options Breakdown

Are We in an AI-Fueled Market Bubble?

Fortune’s recent analysis asks the key question on every trader’s mind in early 2026: Is the ongoing AI boom a bubble that’s destined to pop? The S&P 500 jumped roughly 16 % in 2025, driven largely by AI-linked gains from major tech companies.

Companies like Nvidia, Alphabet, Microsoft and Broadcom were among the biggest contributors to that rally, but critics are uneasy about hundreds of billions of dollars being poured into AI infrastructure and research — some of which may not deliver commensurate returns.

At the same time, capital expenditures from major tech firms are estimated to rise sharply as they build data centers, chips and cloud tools to power AI, raising questions about the efficiency of that spending relative to real earnings gains.

Will the AI Boom Burst? History Doesn’t Give a Simple Answer

Unlike the dot-com frenzy, today’s AI surge is led by well-established, profitable giants rather than untested startups. That’s a key difference — and one reason some analysts argue the current rally is not a classic bubble.

At the same time, critics point to structural valuation risks:

  • Valuations in AI stocks remain stretched relative to earnings.
  • Tech concentration in the S&P 500 is at levels not seen since the dot-com era.
  • Capital expenditures on AI infrastructure may exceed near-term economic returns.

Some macro voices even warn that AI spending could become a “single point of failure” for the market if enthusiasm fades and capital expenditure is re-evaluated.

Yet others project that AI’s transformative potential — much broader than foundational technologies before it — could keep growth intact for years.

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Implications for Tech Stocks & the Bull Market

Whether you believe the AI boom is a bubble or not, how markets price risk and growth expectations matters:

  • Market concentration risks: As AI leaders dominate returns, the S&P 500 becomes less diversified, meaning negative news could disproportionately impact the index.
  • CapEx vs. profits: Massive spending on AI infrastructure increases burn rates even among profitable firms, potentially tightening future margins if AI adoption slows.
  • Narrative risk: If narratives shift from growth potential to “show me the money”, sentiment could shift abruptly — as it did when dot-com earnings failed to follow valuations.

Even Wall Street is divided: some see continued upside if AI accelerates GDP and earnings, while others see a reliance on capital spending and hype that could reverse sharply.

Stocks to Watch on Unusual Whales

When a narrative like “AI boom or bubble” gains traction, options flow and volatility skew often reflect trader positioning ahead of price movements. Key names include:

Core AI & Big Tech Drivers

Broader Growth Exposure

These names often serve as proxy barometers for broader market risk appetite. Changes in put/call skew or volatility before earnings in these tickers can signal shifts in market conviction about the durability of the AI narrative.

Options Flow Themes to Watch Now

In an environment where bubble fears and growth narratives collide, typical options market signals include:

1. Put Skew Expansion
Rising concern about downside risk often shows as puts gain relative to calls in tech leaders and major indexes.

2. Volatility Term Structure Adjustments
Tighter spreads between near-term and longer out-of-the-money implied volatility may indicate hedging behavior against narrative shifts.

3. Unusual Flow Ahead of Earnings & Macro Data
Spikes in unusual options activity often occur before earnings announcements or key economic prints when narrative risk is elevated.

Unusual Whales historical and real-time flow tools can flag these developments before they fully show up in price charts.

Broader Macro & Market Implications

The AI boom’s momentum has coincided with broader market strength, persistent inflation concerns, and evolving monetary policy expectations — all elements that interact with bubble risk narratives:

  • Monetary policy uncertainty can amplify volatility when narrative crack points emerge, such as disappointing earnings in AI sectors.
  • Macro risk premiums can rise if credit spreads widen due to waning confidence in tech-driven growth.
  • Diversification risk can grow as the S&P 500 becomes concentrated in a few large players.

These dynamics underscore that no market theme lives in isolation — AI’s impact intersects with growth forecasts, geopolitical tensions, and Fed expectations.

Final Thoughts

Calling the AI boom a “bubble” isn’t black-and-white — it’s a spectrum of scenarios where valuation, earnings, capex and narrative risk all converge.

For traders, the key edge is understanding how sentiment and positioning change ahead of price — and that’s exactly where options markets often signal first.

Whether the boom continues or a pullback takes shape, watching flow, skew, and volatility gives you clues the crowd hasn’t fully priced in yet.

Call to Action

Want to track these signals before broader markets react?

Unusual Whales gives you historical and real-time options data, implied volatility analytics, GEX indicators, and market tide insights — the tools traders use to anticipate shifts ahead of price action.

Create your free Unusual Whales account and start uncovering opportunities:
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