Bravos Research stated that AI-related stocks currently account for approximately 40% of the total market capitalization of the U.S. stock market. This level of concentration is nearing that seen before the 2000 dot-com bubble and the 1929 market crash, once again raising concerns about the valuation of technology stocks.
The institution noted that the U.S. technology index nearly doubled over the past 12 months. Looking back over the past 26 years, similar gains occurred only during the 2000 dot-com boom and the 2021 tech stock rally, indicating that this AI-driven trading cycle has entered a highly concentrated phase.
Valuation levels are approaching those of the historical tech boom.
Bravos Research believes that the current valuation performance of AI-themed stocks resembles patterns seen in previous technology cycles. High market expectations for new technologies are driving continued capital concentration toward a few large tech companies.
However, the institution also noted that historical technology booms do not imply that the underlying technologies lack real value. Both the internet and previous technological innovations went on to achieve widespread adoption over a longer period and continued to impact economic activity.
The funding environment continues to support technology stocks.
Bravos Research states that technological adoption alone cannot determine stock price movements; financial conditions are equally critical. Historically, some technologies have continued to reshape economic structures even after market downturns, but during periods of liquidity tightening, investor interest in high-risk assets typically declines.
The institution believes that the current liquidity environment remains favorable for technology stocks. Since 2023, the Federal Reserve’s overall policy stance has been relatively accommodative, and the market has not developed a broad expectation of further rate hikes, continuing to support growth stocks.
The common conditions for a bubble have not yet disappeared.
Bravos Research states that several conditions commonly associated with market bubbles still persist, including high investor enthusiasm, ample liquidity, and strong price momentum.
The institution did not deny that risks are accumulating, but believes that AI-related stocks may continue to attract capital until the aforementioned conditions show clear reversal.