AI stocks continue to be a key focus for growth investing in 2025, driven by substantial capital investment in cloud and AI infrastructure along with increasing adoption in various industries. Notable companies in focus recently include Nvidia, Palantir Technologies, Alphabet, Advanced Micro Devices Inc (AMD), Microsoft, Broadcom, and Cloudflare, while weighing potential rewards against market volatility and speculation.
There has been a rise in concerns regarding potential AI valuation bubbles and market volatility, as investors draw parallels to the dot-com boom of the late 1990s, reflecting a cautious sentiment in certain circles. Nevertheless, many analysts still consider core AI stocks to be long-term growth opportunities due to the unparalleled economic influence of AI technologies.
Following the surge in AI stocks, questions have arisen about whether this indicates a bubble; however, it’s argued that while valuations are elevated, they don’t reach the bubble levels seen during the late ’90s tech boom. A healthy correction can be anticipated, which could enhance the attractiveness of valuations, but it does not suggest a bubble or crash.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, explained that an ‘ AI bubble burst’ is the foremost concern in markets now. The problem with a bubble burst and consequent market meltdown is that it will have global ramifications since the global exposure to US equities is huge.
“However, a strong argument is that valuations of AI stocks are not in bubble territory- no where near the tech bubble of the late 1990s. A likely scenario is a correction in AI stock prices without triggering a burst,” added Dr. VK Vijayakumar.
For instance, Viram Shah, the Founder and CEO of Vested Finance, pointed out that Nvidia serves as the clearest example, as its revenue surged by over 250% year-over-year at one stage, while the stock appreciated by more than 700% since the start of 2023.
“Even then, its forward P/E is around 30–35 times, which is high but nowhere close to the 100× valuations seen during the dot-com mania,” said Viram Shah.
| AI Stocks | YTD returns (%) |
|---|---|
| Nvidia | 35.94% |
| Microsoft | 12.46% |
| Advanced Micro Devices Inc | 78.04% |
| Alphabet | 67.23% |
| Palantir Technologies | 114.53% |
| Broadcom | 63.03% |
| Cloudflare | 80.15% |
| Source: marketwatch.com |
What distinguishes the current boom from the dot com bubble?
AI stocks have experienced significant gains over the past two years, leading to questions about a potential bubble. Nevertheless, analysts assert that AI stocks are far from bubble territory, especially when compared to the tech bubble of the late 1990s. Therefore, let’s examine the differences and similarities between the two that may evoke memories of the tech bubble from that era.
Subho Moulik, Founder & CEO, Appreciate, explained that unlike the dot-com era when companies burned cash without profits, today’s Magnificent Seven are highly profitable and self-funding their capital expenditures.
“They’ve generated massive operating earnings in Q3 2025, with their combined $100 billion capital expenditure representing just over 50% of operating earnings. This demonstrates financial strength rather than desperation,” said Moulik.
However, some pure-play AI firms do show significant overvaluation, believes Subho, which may be considered bubble-like: Palantir trades at ~$368 billion market cap, ~80× revenue; C3.ai, SoundHound, and CoreWeave exceed 15× revenue, while no public AI company has crossed $5 billion in revenue. Even OpenAI recently hit $10 billion revenue but is valued at $500 billion.
All you need to know about AI infrastructure
Analysts anticipate that the market for AI infrastructure will approach $200 billion, expanding at a rapid annual rate of 18%. However, the constraints on AI infrastructure go beyond just semiconductors. The energy industry, for instance, serves as an essential indicator for AI growth, as energy usage becomes a crucial limiting factor for the advancement of AI.
Subho Moulik, highlighted that Nvidia reported $57 billion revenue (+62% YoY) and $31.9 billion net income (+65%), with $500 billion in projected chip orders for 2026.
“The AI theme is real, tech giants are spending trillions on chips, data centers, and quantum computing. But history reminds us that bubbles burst; not every AI company will succeed. And in the scenario that consumer facing AI majors fall, so will the infrastructure valuations. Picking firms with solid fundamentals at reasonable valuations, rather than chasing hype, is key,” added Moulik.
What are investors currently paying for?
Experts think that what investors are investing in currently is the extent of AI adoption. Viram Shah said that more than 85% of global companies now use AI in at least one business function, and this number keeps rising.
Shah added that the AI story is not only about Nvidia. Chipmakers like AMD, cloud platforms like Microsoft and Amazon, and software companies such as Adobe and ServiceNow are all building AI into their core offerings.
“Some AI-first firms like Palantir have already seen over 300% stock price jumps in phases because enterprises are testing and deploying new AI tools at a rapid pace. The economic potential is also meaningful. Estimates from global research firms suggest AI could add $2–4 trillion a year to global productivity over time, which explains why investors remain excited,” explained Viram Shah.
Should you invest in AI stocks?
Dr. VK Vijayakumar believes that it is better to avoid AI stocks now, and can be bought on corrections, which make valuations attractive.
On the other side, Viram Shah added that a balanced view would help. He believes AI will create long-term winners, but not every AI-labelled stock will justify its price.
According to Shah, some companies are already reporting that early AI pilots are not yet showing meaningful ROI, and regulators are beginning to pay closer attention to data and model risks.
“Investors can stay involved in the AI theme, but the safest approach is selective exposure to companies with real earnings, strong cash flows, and clear AI demand — not just the hype around it,” said Viram Shah.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
