AI is everywhere, your phone, workplace, in headlines, and yes, even in stock charts. U.S. markets have set repeated record highs in 2025, which naturally raises the question: Is this the next tech bubble, or is there fundamental fuel behind the rally?
Below is a look at what’s happening and how to invest prudently without getting whipsawed by headlines.
Lessons from the Dot-Com Bubble
History can be a guide here. In the late 1990s, internet companies fueled a frenzy of investment. Everyone wanted in. Stock prices soared, and for every Amazon that became a giant, ten other companies went bust. The herd mentality pushed valuations far beyond reality, and when the bubble burst, investors who had “overplayed their hand” paid the price.
The AI surge carries some of those same hallmarks, rapid run-ups, massive inflows of money, and speculation about who the long-term winners will be. But just as with the dot-com era, there may only be a handful of companies that emerge as lasting leaders.
Why Are Stocks Up Right Now?
The market isn’t just reacting to hype. Investors see AI as a game-changer for productivity, efficiency, and growth. Big companies are investing billions, and there’s real potential.
But here’s the catch: the future impact of AI is still uncertain. The gains we’re seeing may be justified, or they may be a sign of overexcitement that will eventually correct. Both can be true: AI could be a massive shift and today’s valuations could still be stretched.
Should You Prepare for a Recession?
While AI grabs headlines, other factors still matter. Interest rates remain high, inflation is still a concern, and global trade issues, such as tariffs, haven’t disappeared, even if they’ve faded from daily news cycles.
Markets don’t move in straight lines. Periods of rapid growth are often followed by pullbacks. A potential recession is still on the radar, and it’s worth remembering that economic cycles are normal.
Should You Adjust Your Portfolio Every Time There’s a Headline?
It’s tempting to react when markets swing or when a particular story dominates the news cycle. Remember when tariffs were the headline every day? Many investors made quick moves, only to regret them later when the market rebounded.
The same lesson applies today: don’t let the AI headlines, or recession talk, completely derail your long-term plan. Reacting to noise often causes more harm than good.
Practical Takeaways for Investors
So, what should you do in the middle of the AI surge?
- Stay diversified. Don’t chase one sector, no matter how exciting. A balanced portfolio helps you weather bubbles and corrections.
- Avoid overplaying your hand. AI may indeed transform the world, but not every AI stock will be a winner.
- Keep investing prudently. Stick to a disciplined approach rather than trying to chase the next hot stock. Or “Stick to a disciplined approach rather than reacting to every headline”, the “swinging” doesn’t make sense to me.
- Focus on your goals. The most important question isn’t “Is AI in a bubble?” It’s “Is my portfolio aligned with my family’s future?”
The Bottom Line
AI may be the story of the moment, but markets are always full of stories, dot-coms, tariffs, housing, crypto, and now artificial intelligence. Some of these shifts bring lasting change, while others fade away.
Instead of betting everything on the next big thing or hiding from the market altogether, the smarter path is staying diversified, investing with discipline, and making sure your plan adapts as your life changes.
At Babin Wealth, our goal is to help you filter out the noise, avoid emotional decisions, and keep your financial future on track, whatever the headlines say.