AI Stocks Now 40% of U.S. Market, Echoing Dot-Com Era

AI stocks now make up about 40% of the U.S. stock market, according to Bravos Research, a concentration level similar to those seen before the 2000 Dot-Com crash and the 1929 market downturn. The firm noted the U.S. technology index has nearly doubled over the past 12 months. Over the last 26 years, similar gains occurred only during the Dot-Com boom in 2000 and the 2021 technology rally. The shape of the chart is not exactly novel.

AI Stock Valuations Mirror Previous Technology Boom Cycles

Bravos said the current concentration in AI-related stocks resembles previous periods when investors heavily favored emerging technologies. Internet companies led markets in 2000, while electricity, radio, and automobile-related firms attracted investment before the 1929 crash. Earlier, railroad companies saw similar investor enthusiasm during the 19th century. The firm noted that many of those technologies later became widely adopted and had a lasting economic impact. Adoption, as history suggests, has rarely arrived without turbulence.

AI Adoption Growth Continues

AI adoption continues to expand. Companies including OpenAI and Anthropic have reported strong revenue growth, while demand for AI-related talent has increased. The share of U.S. companies hiring for AI-related roles has risen from 2% to 5.7% over the past eight years. Investor views have also shifted. Hedge fund manager Ken Griffin, who was previously skeptical about AI, has become more positive on its potential impact on productivity. Even the skeptics, it seems, are updating their models.

Federal Reserve Policy and Liquidity Remain Key Drivers for AI Stocks

Bravos said technology adoption alone does not determine market performance. Previous technology booms continued to drive economic change after market declines, but tighter financial conditions reduced investor appetite for risk. The firm noted liquidity remains supportive for technology stocks. The Federal Reserve has maintained a relatively accommodative policy stance since 2023