Gen AI Bubble Watch
Each month we track the Nasdaq 100 P/E ratio to see whether the generative AI boom is still inflating - or starting to deflate.
Gen AI Bubble Watch
Each month we track the Nasdaq 100 P/E ratio to see whether the generative AI boom is still inflating - or starting to deflate.
Michael Burry, the investor who famously saw the 2008 housing crisis coming, (and got immortalised by Christian Bale in the The Big Short), has doubled down on his warning that an AI-fuelled market bubble could burst - reiterating his bet that the sector may be showing signs of dotcom-style excess. In late February 2026, following his $1.1 billion (£840 million) bet against Nvidia and Palantir, Burry issued a fresh warning, arguing that the current behaviour of AI-linked stocks echoes the run-up to the dotcom crash.
He has pointed specifically to Nvidia’s soaring purchase obligations which have reportedly jumped from $16.1 billion to $95.2 billion year-on-year, suggesting the company is committing to vast supply before fully knowing the depth of future demand. If that demand fails to materialise, margins could compress quickly.
At the same time, Nvidia’s latest financial results underline just how powerful the current AI boom remains. The company recently reported record revenues, highlighting the extraordinary demand for AI chips and infrastructure - even as some investors question whether that pace of growth can continue indefinitely.
Nvidia
the company that powers much of the world’s generative AI infrastructure with its GPUs (Graphics Processing Units) peaked above $4 trillion in 2025 - which is more than the entire FTSE 100 combined.
Palantir
a major player in AI-powered data analytics, now sits at a market capitalisation of around $400 billion.
It is no secret that generative AI is receiving insane amounts of investment. But Burry’s ‘short’, combined with continued chatter about a potential financial bubble, is a sign that the market may be getting carried away. Billions continue to flow into AI infrastructure, models and start-ups - yet investors are still waiting to see whether the long-term revenues will justify the scale of spending.
if OpenAI “goes tits up” there will be
“disastrous economic consequences.”
So how do we actually know if AI investment is getting out of hand? One simple gauge is the Nasdaq 100 P/E ratio.
The price-to-earnings (P/E) ratio measures a company’s share price relative to its earnings. Aggregated across an index like the Nasdaq 100, it shows how much investors are willing to pay for a dollar of earnings across the market. A high P/E suggests strong optimism about future growth - part fact, part sentiment. But when it climbs too far, that optimism can tip into irrational exuberance.
Here is the historical context: the Nasdaq 100 typically sits in a P/E range of 21-32.
During the Dotcom bubble,
it peaked at 73
At the end of 2023,
it was around 28
rising to 32 by the
end of 2024
Today, as of March 2026, it sits at 34. That is still above its usual range - but it suggests some of the froth has come off since the turn of the year as investors begin asking harder questions about how quickly AI spending will translate into real profits.
For advertising professionals, this is not just financial trivia. When the market is frothy, it can spill over into tech spend, AI tools and campaign planning. Inflated valuations can lead to overhyped promises, expensive platforms and investments that do not deliver. Keeping an eye on the Nasdaq 100 P/E ratio is a simple way to monitor whether rational optimism is sliding toward a bubble.
So where does that leave us? The Nasdaq 100 currently sits at a P/E of 37 - sparkling like champagne but teetering on the edge of the table. Exciting? Absolutely. But as Burry’s billion-dollar bet reminds us:
Even the shiniest bubble eventually meets a pin.
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