Gen AI Bubble Watch
We’re tracking the Nasdaq 100 P/E ratio to see just how high AI hype has soared - and whether the bubble might be about to pop.
Gen AI Bubble Watch
We’re tracking the Nasdaq 100 P/E ratio to see just how high AI hype has soared - and whether the bubble might be about to pop.
Michael Burry, the investor who famously saw the 2008 housing crisis coming, (and got immortalised by Christian Bale in the The Big Short), has placed a staggering $1.1 billion bet against two of the biggest companies fueling generative AI investment right now - Nvidia and Palantir.
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, clocks in at above $50 billion.
It is no secret that generative AI is receiving insane amounts of investment. But Burry’s ‘short’, combined with chatter about a potential financial bubble, is a sign that the market may be getting carried away. AI companies like OpenAI simply cannot generate the revenues that the hype implies. Writer and commentator,
Ed Zitron, writer of the highly regarded Blog called ‘Where’s Your Ed At?’ warns that
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 January 2026, it sits at 37. That is well above its usual range and a clear signal that the market may be approaching bubble territory.
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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