AI Chip Bubble Rivals History’s Most Infamous Market Manias

CNBC reported Friday that the artificial intelligence chip rally has now crossed into territory once reserved for history’s most cautionary market episodes.

The Hartnett Warning

Bank of America strategist Michael Hartnett flagged a striking datapoint in a Thursday note. The SOX semiconductor index is trading roughly 62% above its 200-day moving average. That gap more than doubles the equivalent spread seen ahead of Black Monday in 1987 and Black Tuesday in 1929. It also exceeds the Nasdaq’s 55% premium before the dot-com collapse in 2000. Most strikingly, it approaches the 73% spread recorded in French equities before the Mississippi Bubble burst in 1720. That episode saw shares of a colonial company briefly treated as legal tender, effectively doubling France’s money supply before the scheme unravelled. Hartnett noted collapsing volatility, surging stocks, and concentrated market leadership as hallmarks of the current moment.

How the AI Build-Out Compares to Past Booms

Not every analyst views the spending surge as alarming. The Financial Times’ Robin Wigglesworth described AI capital expenditure as minor relative to the 1860s railway boom, which generated bond issuance equivalent to roughly $10 trillion in today’s GDP-adjusted terms, citing a JPMorgan analysis. Others argue bubbles and transformation are not mutually exclusive. Oaktree Capital Management co-founder Howard Marks recently referenced an essay noting that railroads, electricity, and broadband were all overbuilt before reshaping the American economy. AI, the argument goes, is unlikely to be the first transformative technology that skips the painful correction phase entirely.

Background: Cloud Revenue Offers a Silver Lining

Amid the bubble debate, actual revenue from AI infrastructure is arriving. Alphabet’s cloud unit posted 63% annual growth in the first quarter. Amazon’s AWS division grew 28% year-over-year, reaching $37.59 billion in segment sales. Microsoft’s Azure-linked cloud division grew 40%, generating $34.68 billion in its fiscal third quarter. Those results have helped sustain broader equity sentiment even as the foundation beneath it narrows.

Rally Increasingly Rests on Fewer Shoulders

That narrowing is drawing concern from technical analysts. Piper Sandler strategist Craig Johnson noted this week that the S&P 500’s advance-decline line is diverging sharply from index-level gains, meaning fewer individual stocks are participating in the rally’s push to record highs. Chipmakers including AMD, Micron, Marvell, and Intel have all shown parabolic price action since late March. Economist Ann Pettifor, director of the Policy Research in Macroeconomics organization, put it plainly to CNBC: assembling more than a trillion dollars in capital to fund AI investment is “what everybody talks about as a bubble.”