'I don't see a bubble': Why Wall Street thinks the stock market can keep climbing even as AI anxiety grows

As stocks sit near all-time highs, strategists are brushing off concerns of an AI bubble.

At least for now.

The S&P 500 (^GSPC) is on pace to close out the year with a gain of over 17%, powered by a 26% jump in technology stocks (XLK).

“I don’t see a bubble at all. However, I do believe we’re going to be going into a bubble,” Sanctuary Wealth chief investment strategist Mary Ann Bartels told Yahoo Finance last week.

Batels compared the current market to prior bubbles, including the late 1920s and the dot-com bubble.

“We’re tracking pretty similarly. In fact, it’s kind of eerie how we’re actually tracking that pattern,” she said. “I see a bubble occurring but not out until maybe ’29 into ’30.”

But for the time being, Sanctuary strategists forecast that tech will continue leading the market higher out into the end of the decade. They place the S&P 500 anywhere between 10,000 and 13,000 by 2030.

“That’s why we’re calling 2026, you know, to be fearless, that there’s still significant upside in this market, particularly for technology,” she said.

Part of the upside comes from semiconductor stocks. Once treated as commodity plays, they become growth stocks, with Nvidia (NVDA) “basically rewriting the path for semiconductor chips.”

The AI chip powerhouse has surged over 40% so far this year, pushing its market cap to $4.6 trillion and making it the most valuable publicly traded company. On Friday, Nvidia shares rose after the company announced a $20 billion licensing deal with specialized chipmaker Groq (GROQ.PVT).

The deal was announced as the chip space has heated up, with Alphabet’s Google (GOOG) making headlines with its specialized customer chips called TPUs.

Alphabet stock has soared some 65% year to date.

UBS strategists also expect the AI boom and robust profit growth to underpin market gains in 2026.

“We note that forward price-to-earnings multiples are only marginally higher than at the start of the year, reinforcing the fact that earnings growth and not valuation bubbles have driven market gains,” wrote the strategists last week.

UBS forecasts S&P 500 earnings per share to grow about 10% year over year, pushing the index to 7,700 by the end of next year.

Veteran strategist Ed Yardeni also sees the index reaching 7,700 next year, with the probability of his “Roaring 2020s” scenario at 60%. He cited, among other reasons, tax benefits from the “One Big Beautiful Bill” that passed this year and the AI boom.

In October, Goldman Sachs analysts argued the stock market isn’t in a bubble because tech stocks have risen mostly due to actual growth, not speculative bets. The firm noted that top-performing companies have strong balance sheets and the AI sector is still mostly led by a few big players, while most bubbles occur when many new entrants rush into a hot sector.

While most of the earnings growth this year has been led by the largest seven stocks in the S&P 500, Goldman Sachs analysts also see participation broadening.

“We expect macro tailwinds from accelerating economic growth and a fading tariff drag on margins will support an acceleration in the earnings growth rate for the remaining 493 stocks,” wrote Goldman’s Ben Snider earlier this month.

Meanwhile, AI productivity is expected to lift earnings for companies outside the “Magnificent 7” stocks, said Joseph Shaposhnik, founder of Rainwater Equity.

“I think some of them will take a break — some of them will perform well,” he told Yahoo Finance.

“But really, the opportunity for outsized returns next year are going to be outside those seven businesses,” he added.

Ines Ferre is a Senior Business Reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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