The Shiller P/E ratio has reached 42, its highest level since the dot-com boom. This time, AI stocks have driven that metric to its highs. This has stoked fears that the cycle will repeat, leading to an AI bust.
Like the internet, AI is likely here to stay. Still, internet stocks endured the dot-com bust despite the industry's long-term successes. Thus, expecting the same thing to happen to AI stocks is a real concern.
This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia.
Continue » However, such events are nearly impossible to time, and those who sell out of the market to avoid a market downturn could also miss out on long-term gains. Thus, the compromise may be to pivot toward tech stocks likely to survive such an event. Knowing that, these three should hold up well even if the dreaded AI bust occurs.
Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) missed the dot-com bust by waiting until 2004 to go public. However, the company has used AI since 2001, and thanks to its successes with Google Gemini, it has successfully responded to the competitive threat from ChatGPT. Admittedly, this has come at a cost.
It has raised its capital expenditures (capex) to the $195 billion to $205 billion range for 2026, up from $91 billion in 2025. It has increased its liquidity to over $242 billion to get ahead of this spending, and long-term debt more than doubled to over $98 billion over the previous six months. Also, free cash flow, which excludes capex, is now $53 billion for the trailing 12 months, down from $67 billion one year ago.
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