Google searches for “AI bubble” have surged over the past three years, accelerating sharply through 2025. According to Google Trends data, interest stayed muted through most of 2024 before spiking in spring 2025 and peaking in the fall. This pattern suggests growing public concern — or at least heightened curiosity — about whether the excitement around artificial intelligence is masking speculative excess.
While rising search activity doesn’t prove the existence of a bubble, it does signal a shift in sentiment. When the broader public starts questioning whether valuations have become overstretched, it often means the conversation has moved beyond financial circles and into the mainstream.
It is in this context that the central question of this article arises: How can we detect a stock market bubble?
A stock market bubble forms when prices climb far beyond the economic reality that should support them. It typically occurs when investors shift from buying assets for what they currently earn to buying them for what they might one day become — assuming extraordinary future profits or simply expecting someone else to pay more later.
Bubbles rarely start with weak fundamentals. They begin with strong, compelling stories that are stretched to unrealistic extremes. This was true in the dot-com boom of 2000, in the housing surge of 2008, and in nearly every thematic mania that has followed.
One of the earliest signs of a bubble emerges when expectations rise far more quickly than actual profitability. Companies may deliver impressive revenue growth or breakthrough innovation, yet the surrounding ecosystem often struggles to convert that excitement into sustainable earnings. This creates a familiar distortion: a few dominant firms appear unstoppable while most remain unproven. Markets, after all, price the future — and when that future becomes overly optimistic, valuations stretch well beyond historical norms.
Traditional indicators make this tension visible. Price-to-earnings ratios can climb sharply, not because earnings are weak, but because investors assume future profits will eventually match the narrative. Longer-term measures like the Shiller CAPE highlight when these assumptions have persisted long enough to disconnect from economic cycles. None of these metrics signal when a bubble will end, but they help reveal when markets are trading on faith rather than fundamentals.
Almost every bubble shares a deeper structural vulnerability: a mismatch between investment and monetization. Industries experiencing rapid capital inflows often require enormous up-front spending — in infrastructure, in computing power, in marketing, in credit — long before the revenues to justify those costs appear. When investment grows faster than monetization, vigilance becomes essential. Markets can tolerate heavy spending for a while, but if the return on investment remains uncertain, sentiment can shift abruptly.
Another consistent fragility lies in the concentration of performance. A small group of companies may carry the entire market, boosted mechanically by passive flows and investor enthusiasm. This concentration is not necessarily a sign of weakness on its own, but it increases the market’s sensitivity to any disappointment from those leaders. A single stock becomes a thermometer for the entire narrative, even though one company — no matter how strong — cannot validate the sustainability of an entire theme.
The goal isn’t to declare any specific market a bubble, but to recognize when risk begins to drift away from reality. Elevated valuations, slowing marginal returns on investment, performance concentrated in a handful of leaders, and a visible shift in public sentiment don’t guarantee a collapse — but they do outline the conditions in which bubbles tend to form.
Rather than asking, “Is this a bubble?” investors might consider a more practical question:
Are expectations rising faster than the world can reasonably deliver?
When that answer becomes unclear, caution isn’t a prediction — it’s a strategy.
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