Capstone Investments – February 4 2026
By Bryce Pease CFP® Accredited Investment Fiduciary® Casey Morris CFP® Capstone Pacific Investment Strategies, Inc. California, Colorado, Nebraska
This is the fourth and final article discussing the question “are we in an artificial intelligence (AI) bubble”?
For example, NVIDIA, the biggest of AI companies, has a share price over 50 times its earnings.1 What does that mean in plain English? It means that, for every dollar of NVIDIA’s earnings that investors hope to receive, they are willing to pay fifty times more. So, that’s why we might be in an AI bubble. The question now is, what do we do about it?
The reason investors are willing to pay so much to own stock in AI companies is due to the expectation that, at some point, those companies will generate soaring profits. But there’s an elephant in the room: The vast majority of AI companies are not profitable. Quite frankly, most of them are not even close.
AI is expensive. It costs billions to build and operate the infrastructure necessary to support it. In fact, the tech industry is investing so much that total spending on AI actually outpaced consumer spending in the first half of 2024.2
But as any business owner will tell you, costs matter. For example, take OpenAI, maker of ChatGPT. It’s probably the most famous AI company in the world, so you’d expect it to make a lot of money. And it does — but nowhere close to how much it spends. Some analysts project that OpenAI had a net loss of $13 billion in the third quarter of 2024 alone.7 The company itself has said it only hopes to become profitable in 2030. Most other AI companies are thought to be operating at a similar loss. They simply aren’t generating enough revenue to do otherwise. Which could mean AI may be in a bubble.
The single worst thing an investor can do, is try to “time” when that bubble might burst. There are several reasons for this. First, despite everything we just wrote, we may not actually be in a bubble. It’s perfectly possible that, as AI technology matures, and people grow both more accustomed to it and more adept at using it, major profits will follow.
Second, even if we are in a bubble, there is simply no way to tell when it will pop. It could be in three months; it could be in three years. While it would certainly be nice if we could stay invested and then get out right before the pop, that’s just not realistic. For that reason, attempting to time the bubble leaves us more vulnerable to simply being wrong. We might be way too early and miss out on further market growth. We might end up being too late and miss the rebound after the bubble.
We hope you found this information — written without AI, by the way! — to be useful, especially when you hear the term “AI bubble” in the media. As always, if you have any questions or concerns, please let us know.
Casey and Bryce 626-915-7006 info@capstonepacificinc.com
1 “Are we in an AI bubble?” CNBC, https://www.cnbc.com/2025/10/21/are-we-in-an-ai-bubble.html
2 “AI spending is boosting the economy, but many businesses are in survival mode,” CNBC, https://www.cnbc.com/2025/10/21/are-we-in-an-ai-bubble.html
3 “Winners and Losers from the Dot Com Bubble Rate Hike Cycle,” YCharts, https://get.ycharts.com/resources/blog/winners-amp-losers-from-the-dot-com-bubble-rate-hike-cycle/
