Recently, there’s been quite a bit of talk about a potential stock market crash. It seems a lot of people believe today’s market conditions closely resemble those of the late 1990s (the dotcom boom), which ended in tears.
Should we be worried about a crash? Here’s my take.
The AI bubble
There are a few things I want to address here. First, let’s talk about artificial intelligence (AI) – is it a bubble (where valuations are completely detached from reality) and a repeat of the late 1990s?
I don’t think so. The reason why is that the companies spearheading this technology revolution – like Microsoft, Alphabet, and Amazon – have extremely strong, diversified business models, tons of cash flow, and fortress balance sheets.
Meanwhile, their valuations aren’t crazy. Alphabet, for example, currently sports a price-to-earnings (P/E) ratio of around 25.
Having said all that, tech stocks are known for having sharp pullbacks at times. It happened in 2018, 2022, and early 2025, so we can’t rule out another one.
Bubbles in the market
Now, while I don’t see AI as a bubble, I do believe there are bubbles in other areas of the market. Quantum computing’s a good example.
Take the stock Quantum Computing (NASDAQ: QUBT) for instance (the fact its name is the same as its industry is a major red flag, if you ask me).
Currently, this company has a market-cap of around $4bn. Yet sales for this year are only expected to be around $440,000.
So we’re looking at a price-to-sales ratio of about 9,100. I reckon that valuation’s detached from the fundamentals.
To put that in perspective, AI company Palantir, which has been called one of the most overvalued companies in history, has a price-to-sales ratio of about 100.
Of course, quantum computing (the industry) has lots of potential. I just think the stocks in it have gott way ahead of themselves. And therefore I wouldn’t be surprised to see a meltdown in this area of the market at some point.
The general backdrop for stocks
Zooming out and looking at the broader market though, I reckon the backdrop for stocks looks okay.
In the US, interest rates are coming down and this should be supportive for businesses. Note that stocks have historically done well as rates have come down.
Meanwhile, US corporate earnings are rising. For Q4 2025 through Q2 2026, analysts are calling for earnings growth rates of 7.3%, 11.8%, and 12.7% respectively, according to FactSet.
Turning to the UK market, many stocks still look attractively valued. Within the FTSE 100, there are many companies with P/E ratios of less than 15.
As for UK small-caps, many of these stocks continue to trade at bargain valuations. There’s definitely no bubble here.
