Almost a Bubble, Not Quite
A technology-led rally has concentrated gains in a few companies — but history suggests investors should prepare for rotation rather than collapse
Global equity markets have spent the past few years marching steadily upward, propelled by a surge of enthusiasm for artificial intelligence and a small cohort of giant technology firms. Yet beneath the surface, the structure of the rally is beginning to change. According to a recent report by the QEP Investment Team at Schroders, the market may not be in a classic bubble but rather in what might be called an “almost bubble” — a period marked by high expectations, concentrated leadership and growing questions about what comes next.
The rise of artificial intelligence has been the dominant investment narrative since late 2022. The emergence of generative AI triggered a wave of capital spending, corporate experimentation and investor excitement. Equity markets followed suit. A small group of technology giants, often labelled the “Magnificent Seven”, generated a disproportionate share of global market gains. By the end of 2025 these companies accounted for roughly 35% of the S&P 500’s market capitalisation while explaining more than half of its cumulative returns over the previous three years.
Such concentration naturally invites comparisons with past bubbles. In earlier episodes; from Japan’s asset boom in the late 1980s to the dot-com mania of the late 1990s, a narrow set of stocks captured investors’ imagination and dominated market performance. When sentiment turned, the results were painful. But the current situation differs in several important respects.
For one thing, the companies leading today’s rally are not speculative start-ups. They are profitable firms with formidable cash flows, dominant market positions and large customer bases. Their valuations, while elevated, remain below the extremes seen during earlier bubbles. Forward price-to-earnings multiples for the technology leaders are significantly lower than those reached during the dot-com era, suggesting that expectations may be optimistic but not entirely detached from reality.
Moreover, the broader market has begun to participate in the rally. During 2025 the S&P 500’s valuation expanded not only because technology stocks rose but also because other sectors started catching up. This broadening participation hints at a possible shift in market leadership rather than an imminent collapse. Investors who once felt compelled to own only the dominant technology names are gradually rediscovering opportunities elsewhere.
Nevertheless, history offers a cautionary reminder that even high-quality companies can become poor investments if purchased at excessive prices. A useful comparison lies in the “Nifty Fifty” episode of the late 1960s and early 1970s. Back then a group of blue-chip American companies, including Coca-Cola, IBM and Procter & Gamble, was widely regarded as so reliable that investors believed they could be bought at almost any price.
The businesses themselves largely justified their reputations. Many continued to grow and dominate their industries for decades. Yet investors who bought these stocks at peak valuations often endured years of disappointing returns as prices eventually adjusted. The lesson is simple but often forgotten: exceptional companies do not guarantee exceptional investment outcomes when expectations become too exuberant.
If the present market resembles the Nifty Fifty period, the next phase may involve rotation rather than collapse. Leadership in financial markets rarely remains fixed. After the technology bubble burst in the early 2000s, commodities, emerging markets and value stocks enjoyed a long period of outperformance. In the inflationary environment of the 1970s, real assets and cyclical industries proved more resilient than the growth stocks that had previously dominated.
A similar shift could occur in the years ahead. Cyclical sectors such as industrials or energy might benefit from economic reacceleration, while healthcare and other defensive industries could attract investors seeking stability. Emerging markets and non-American equities may also draw attention if the dominance of US technology companies begins to fade.
Yet none of this implies that the artificial-intelligence story is finished. On the contrary, the technology is likely to reshape many industries over the coming decade. The question is not whether AI will transform the economy but which companies will ultimately capture the profits. History suggests that the initial pioneers are not always the biggest long-term beneficiaries. Often the greatest gains accrue to firms that adopt the technology effectively rather than those that first popularise it.
Several risks could complicate the outlook. A slowdown in global growth would threaten earnings expectations, particularly for companies priced for rapid expansion. Inflation could also re-emerge as a destabilising force, especially if geopolitical tensions disrupt trade or energy markets. And the enormous investment currently flowing into AI infrastructure; data centres, chips and cloud systems, raises the possibility that capacity could outpace demand.
Another overlooked constraint lies in the real economy. The energy required to power vast networks of AI data centres is growing rapidly. If electricity supply fails to keep pace with demand, it could reshape the economics of the industry and shift investor attention toward utilities, energy producers and infrastructure providers.
Faced with such uncertainties, the most sensible strategy may be neither to chase the dominant technology stocks nor to abandon equities altogether. Instead investors may find greater resilience in diversification. Holding exposure to AI leaders while gradually expanding into undervalued sectors and regions can create portfolios that are better prepared for a shift in market leadership.
Markets at all-time highs often tempt investors to predict dramatic turning points. Yet history suggests that the more common outcome is gradual change rather than sudden collapse. The current environment may indeed display some characteristics of a bubble, lofty expectations, crowded trades and intense narrative enthusiasm. But it also contains the seeds of a broader market.
In other words, the defining feature of the coming years may not be the bursting of a bubble but the spreading of opportunity. For investors willing to look beyond the most celebrated technology names, global equities may offer what the Schroders report calls “something for everyone.”
