Are markets in a bubble? You asked, Katie Martin answered
Stay informed with free updates
Simply sign up to the Equities myFT Digest — delivered directly to your inbox.
Investors are in high spirits, with mounting interest in artificial intelligence pushing stock markets to record highs, while offsetting fears of a Trump trade war. Is this optimism misplaced? Is AI driving financial markets into bubble territory and what happens if the bubble bursts? The FT’s markets columnist Katie Martin answered your questions. The session took place here at 1pm on Thursday 30 October, but you can read the full Q&A below.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: Is the AI market a bubble, or is this time different? Are we only in the early stages of the party, meaning we have to keep dancing as long as the music is on?
Answered by: Katie Martin
Answer: This is the really big question. “This time is different” are some of the most cursed words in financial markets. Cynics would say it really never is different. Periods of excess are as old as financial markets themselves and they just don’t tend to end well. But plenty of really smart people really disagree on this point, and will argue until the cows come home that we’re just at the beginning of a huge technological transformation, not at the end of an excessive financial party. Big tech makes big money. This really isn’t like the dotcom boom and bust where investors were betting on nothing but vague promises. But even the true believers in AI know that the early financial winners from periods of true technological innovation do not always end up as the long-term gainers. Right now, the market is rewarding big tech — the Nvidias of the world. But in the end, it might be the consumers of AI (healthcare companies, banks, others that we haven’t really figured out yet) that use AI to boost productivity. Your point about dancing while the music is playing is possibly the second most accursed phrase in markets, as it refers back to the famous Chuck Prince quote of 2007, which is now seen as a display of crushing pre-crisis complacency. But investors do say it now, with a perfectly straight face, particularly in relation to US monetary policy. As long as US rates keep falling, which seems likely given the economic picture and Donald Trump’s explicit preferences, it’s hard to resist the allure of risky assets.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: You responded to a young investor. How about a Gen-Xer? I recently joined the Great Wealth transfer. My dad’s 401k was passed down to me. Now I have twice as much to lose with 10 years before retirement. I’m reluctant to take what my dad worked so hard to save and put it in this market.
Answered by: Katie Martin
Answer: I hear you for sure and I hope you have a good wealth manager on speed dial that you can trust. Good luck!
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: Coming back to diversification, what markets are not very exposed to the AI bubble at the moment?
Answered by: Katie Martin
Answer: Europe and UK are often seen as diversifiers because we have cunningly failed to compete with US Big Tech over the years. But IF this is a bubble (still an if) and IF it bursts (ditto) then as I say, in the short term, no risky assets would be spared.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: I’m worried about the opacity of the private credit market — lack of transparency around covenants, double-pledging, refinancing risk and the repackaging of loans and offloaded to public markets (SRTs!). Am I the only one clutching my pearls??
Answered by: Katie Martin
Answer: You are not alone! The Bank of England is among the institutions also clutching pearls here: https://www.ft.com/content/cd0e2790-7ac7-49cf-b3e3-9c506a7d0ba8 Right now, it looks like the wobbles in US credit markets (see the extensive and excellent coverage of that from my colleague Robert Smith and others here at the FT) are mini-explosions and not systemic. Still warrants extremely close attention though. Those of us who remember 2007 (and have the grey hair to prove it) remember a similar set of ‘oh I’m sure it’s a one-off’ type reactions when subprime mortgage lenders started getting in to hot water in the run-up to the crisis of 08. Is this that? I doubt it and I hope not but as I say, it’s worth watching very closely.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: Hi from Ireland, Katie! If you had to pick one of the tech stocks to back, which would you pick? Microsoft is my pick for solid but boring and resilient!
Answered by: Katie Martin
Answer: Hello over there! (See you at Kilkenomics?) I’m not getting in to picking stocks here — there be dragons. But one important thing to note about a lot of the big US tech firms that are holding up so much sky in markets at the moment is that they do other stuff in addition to just spending money on AI. Even if AI dies entirely (highly unlikely), they still have other extremely healthy revenue streams. This is somewhat reassuring.
Some content could not load. Check your internet connection or browser settings.
Question asked by: kx
Question: Do you agree that mkt participants are in denial? Banks became commodities houses and private mkts firms/shadow banking are playing the music helped by monetary & fiscal policies since 08. We were in a bubble even before the AI momentum. If you look at the last 20y credit spread you get scared.
Answered by: Katie Martin
Answer: In denial? Not really. In fact when I speak to institutional investors, they mostly say the same thing: they don’t like what’s going on with the Fed, with tariffs, with the fiscal situation etc, etc, etc. But they’re paid to invest. If they have tried to push back at the ascent in risky assets this year, they are badly trailing behind their peers. So, nervous? Yes. Hedged? Where they can be, yes, especially against potential further downsides in the dollar. But they are still playing.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Nukus
Question: The suggestion that we are in an AI bubble is everywhere and yet if we cast our thoughts back to its younger cousin, the internet bubble, the upward trend continued for several years past the point when the talk of a bubble was first aired. Will the same apply here in your opinion?
Answered by: Katie Martin
Answer: In short, yes. We are really lacking a catalyst for the broad market direction to change. This is why a lot of big investment firms are sticking with the trend even though many of them are sceptical about how much longer it will last. Everyone hopes they will be among the first rather than among the last to hop out if the market did sour.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: Do you think the recent credit crisis in the US surrounding Tricolor and First Brands reveals any pattern in private credit that could be linked to the AI bubble and its potential bursting?
Answered by: Katie Martin
Answer: I think the link between the two is the misallocation of capital. And look, that’s what risk is, the chance of that happening is what makes markets tick. If there’s a more direct line between AI as such and these two seemingly idiosyncratic cases (she says, hoping) then I’d be interested to hear that idea — drop me a line.
Some content could not load. Check your internet connection or browser settings.
Question asked by: macro credit
Question: Yesterday J Powell called the economy “K-shaped”. The rich/large firms are getting richer, the poor poorer. Technology points the same way. Financial markets and the economy are diverging. What gives? Will it be economics, or politics?
Answered by: Katie Martin
Answer: This is a really important issue and it’s significant that the Fed chair himself is clearly taking it seriously. It’s not a new concept as such, but we are clearly seeing pretty different economic outcomes between different income groups. My colleague Tej wrote a really interesting note about this recently: https://www.ft.com/content/5df25200-8eb7-4640-9511-ae4d10b73f81One school of thought here is that a nice run of further interest rate cuts (even despite the coyness from Powell yesterday, I’ll bet you a tenner the next move in rates is down rather than up) should in theory help smaller companies and the lower end of the income scale to stabilize/catch up.On the issue of economics vs politics… They’re joined at the hip already but again, not to ride on my colleagues’ coat tails too much, but Chris Giles did a really nice piece on this yesterday. In short, fiscal stuff is trumping the monetary influence on Treasuries these days, with potentially important long-term consequences.https://www.ft.com/content/c3966686-9b67-4eff-986a-fb672481579a
Some content could not load. Check your internet connection or browser settings.
Question asked by: regulus maximus
Question: In the event of an AI bubble popping, how would you expect gold to perform?
Answered by: Katie Martin
Answer: Ooh good question. In theory, gold is a great safe retreat in times when stocks fall out of bed, and it does sometimes show this pattern in the short term at least. But gold has had a fantastic run in 2025 even while stocks have been marching higher. In that sense, it’s a FOMO-type risky asset like lots of others. If that’s the case, it would not necessarily push higher if stocks did take a hit. So my annoying answer is: I don’t know, sorry!
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: Given the risk of a bubble popping, would diversifying using Asian equities (China, Japan, Korea, India) be a good strategy? Or do they suffer from the same correlated risks?
Answered by: Katie Martin
Answer: Funny you should ask — I have been talking to a few investors about that this week. The broad view is that if you are looking to Asia as a diversifier (and who can blame you? Korean stocks are on a tear!) then you are kind of doing it wrong. A big reason for outperformance there, for example, is the AI trade. Geography alone is not a great diversifier here.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: If this is a bubble, in your opinion what’s keeping it from popping right now — is it purely AI enthusiasm, the ‘Ouroboros’ circularity trade amongst OpenAI et al . . . or is there a fundamental shift in capital markets that has made traditional valuation metrics obsolete?
Answered by: Katie Martin
Answer: Well, as I think I’ve mentioned elsewhere, a ‘pop’ needs a trigger. And right now the market is incredibly resilient to all sorts of things, from presidential interference in the Fed to unusual levels of involvement of the administration in corporate strategy. I have been asking lots of investors recently about this circular financing thing you mention and pretty much everyone says they’re extremely wary of it and concerned that it could amplify risks if something were to go wrong for one of the central players. On valuation metrics, sure, you can argue some US stocks in particular are looking toppy but ultimately, investors want growth, and that US is where a lot of that growth lives. Global capital will keep heading that way until it has a good reason not to.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: Are Nvidia stocks poised to go down, and maybe even to a 2015-like level? The reason is fundamental: sooner or later Chinese companies are going to deliver lots of high-performance AI chips, the AI bubble will burst, or both. For how long is it still safe to keep all retirement savings in Nvidia?
Answered by: Katie Martin
Answer: Are they poised to go down? Well they’re up by 54 per cent so far this year and the market assigns a value of $5tn to the company. Trillion with a T! So the market does not appear to think so. But a lot of people seem to have forgotten the DeepSeek moment in January, when it turned out that China can do AI much more cheaply than the US and to a respectable standard too. In fact, restrictions on chip sales to China over the years appear to have forced it to really innovate in this space. This generated a very bad day in US tech stocks and it still hangs in the background — investors are still unsure just how deep and wide the moat around US chips really is and whether others can catch up.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: A recurring topic lately has been about a potential US default on the medium term. What would such a scenario look like in practice? Would investors holding assets outside of the US be insulated? In such a scenario, which asset classes — real estate, commodities — offer the most protection?
Answered by: Katie Martin
Answer: I can’t sugar coat this one: a US debt default would be very, very, very, very bad, and no obvious safe hiding places spring to mind (except maybe from gold?). It’s incredibly unlikely though. There was some talk at the start of this year about effectively attaching geopolitical/defence-related terms and conditions to US government bonds, but the Trump administration has been distancing itself from this idea. I would not lose sleep about this, honestly. If I’m wrong, you can find me in a local bar drinking whisky and staring in to the middle distance to tell me so.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Dave W
Question: How persuaded are you by Jeff Bezos comment that AI is a “good bubble?” I can’t immediately see a historical analogy we can draw?
Answered by: Katie Martin
Answer: His point is not quite as wacky as it sounds. What he was saying is that this is not likely to be a “financial” bubble that sends shockwaves through the banking system – the number-one way that financial crunches spread in to the wider economy. His view is that the technology and innovation that are left behind will still be worth it but that sure, some people will lose money on daft bets.I feel like it’s easier to think that way when you already have a few billion in the bank and you’re not one of the many people losing money at the peak, but as I say, it does make sense.One important thing to note here is that you don’t have to hate the tech (Bezos certainly doesn’t) to be wary of the asset-price inflation.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: Should I wait until the bubble bursts before I start investing, even if that takes years? I don’t feel confident investing right now, knowing that everything seems overpriced and a crash could be coming.
Answered by: Katie Martin
Answer: Well, I don’t give investment advice and a lot will depend on your individual circumstances, but I do get the impression from your question that you’re enviably young. If you are, then all the evidence suggests that the earlier you start saving for retirement, the better. There really is nothing better than pumping money into markets when you’re young and ignoring the ups and, more importantly, the downs. If you pull out of markets or are not invested on their big turnaround days, you will miss out on a lot of returns. The cliché is annoyingly true — it’s time in the market, not timing the market, that counts.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Birmingham boss
Question: The Mag7 have successfully diversified across internet, computing, crypto, AI, quantum, etc, cycles so far — that’s why they are doing well. Could their valuations reflect this proven adaptability across technological waves, or is this precisely the rationalisation that characterises bubble peaks?
Answered by: Katie Martin
Answer: I think the main feature of markets this year is not just the bubble narrative. It’s the incredible resilience in risky markets and particularly in corporate America. This is something to be celebrated, but not taken for granted. It’s notable to me that investors are proving a little more discerning — witness the hit to Meta shares this week after it suggested it would splash a lot more cash at AI, whereas the more restrained stance from Alphabet (Google) and Microsoft was more well received. (Details here: https://www.ft.com/content/32615d88-91a9-4fa8-8ad8-e6abb8e83397)
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: They call it the “everything bubble”. What betting against the market instrument is likely to prevail? Germany’s 500B loan, lively nightlife, numerous large scale protests, inflation, I’m sure you know more red flags. Aren’t we one big anxiety attack away from a collapse?
Answered by: Katie Martin
Answer: It does feel a bit like an everything bubble. It’s not just stocks, but also corporate credit (where you now get next to no pick-up in yields relative to government bonds), crypto, gold, you name it. There’s a lot of upward momentum in risky assets that has been really powerful since the “Liberation Day” shock in April. That said, there’s decent reason to believe that this is actually quite sustainable, or at least that a bubble can continue to swell for a long time yet. Crucially, unlike other big periods of excess, like the lead-up to the financial crisis of 2008, a lot of AI spending is coming from cash that the big hyperscalers already have on their books — they’re not using borrowed money (leverage), which was the real rocket fuel for disaster in ’08. It would therefore take something more solid than an outbreak of nerves to topple this over, I suspect.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Leonardo Satta
Question: The Federal Reserve seems poised to reduce interest rates in the foreseeable future. Do you think the bubble might burst even without an increase in interest rates to trigger it?
Answered by: Katie Martin
Answer: So last night was quite interesting — the Fed indicated pretty heavily that further interest rate cuts in the coming months are not a certainty. It’s flying slightly blind without the usual flow of economic data, but it is clearly not ready to declare victory over inflation yet. Nonetheless, the direction of travel appears clear: that rates are likely to fall further rather than rise again, albeit not fall as fast as the Trump administration would like. So what does that mean? Well it probably means that stocks have further to climb at this point, as it should enable smaller, more rate-sensitive stocks to catch up with their megatech cousins. One thing to bear in mind here is the results that came out yesterday from Chipotle — here’s the story from my colleague Taylor: https://www.ft.com/content/ea85973a-980d-4ba7-b647-396b78667cdb. This is a sign that lower income groups are feeling the pinch. You can argue, and some investors do, that lower interest rates are one of the things we need to ease the pressure and allow stocks like that to catch up. To answer your question directly, though, are high-ish rates a potential trigger for a crash? It feels unlikely given how high rates were for so long — it didn’t hold the markets back then.
Some content could not load. Check your internet connection or browser settings.
Question asked by: CharlesII
Question: Let’s assume this is a bubble, much like dotcom in 2000 or railroads in 1840 or any other in between. Isn’t the difference this time round that asset classes are more correlated than previously — so where do we go to hide (other than cash)?
Answered by: Katie Martin
Answer: Correlation is one thing. It’s important to remember that it’s not just the obvious big tech stocks that are vulnerable here — a large chunk of private equity and private credit, for example, is also heavily exposed to the same big theme. The other big difference is that the railroads lasted a long time after they were built and proved pretty useful in the long term. It’s not clear that the same is true of chips or data centres, which have a shorter shelf life. So, where to hide? If a crash happens (still an if! This isn’t a certainty!) and if it morphs into a real economic downturn, then long-term government bonds should in theory provide some padding, on the basis that interest rates would be likely to fall. If it’s more of a controlled explosion, however, with AI-related stocks simply recalibrating to a lower value, then the damage should be restricted just to those names in the long term.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Jacque Reacher
Question: Even Sam Altman admits that AI companies are in a bubble. Based on other bubbles how wide will the financial value destruction ripple out beyond the AI sector?
Answered by: Katie Martin
Answer: This is a good question and opinions vary a little on the answer. In the short term, I would expect that if this did indeed turn out to be a bubble that burst (not a certainty in itself) then there would be nowhere to hide in risky assets — the damage would be pretty indiscriminate. US stock markets are so incredibly huge relative to those in other economies, and individual US big tech stocks are so, well, big, that if there was a blow-up, this would inflict damage across the US and other markets in a burst of risk aversion. The big question really is whether that would last. My hunch is that over the longer term, other stock markets that are less tech-heavy (like the UK) should in theory recover more quickly, so the really lasting impairment would be to assets that are directly AI-related.
Some content could not load. Check your internet connection or browser settings.
Question asked by: Anonymous
Question: That’s all we have time for. Thanks FT readers for your questions and Katie for your thoughtful responses. We’ll be back with another Ask an Expert next Thursday. Visit www.ft.com/ask-an-expert.
Answered by: Katie Martin
Answer: Thanks Leke! This has been fun and it’s really useful to see the sorts of questions that are on readers’ minds as it helps to shape what I do. Bubble talk is on everyone’s lips at the moment and it’s natural to be wary when valuations are so high. But I guess I come back to what I wrote a few weeks ago: without a trigger to force a serious retreat, for now the path of least resistance is higher: https://www.ft.com/content/306f371a-5e2b-4a4e-999c-ed483ca33203. Good luck everyone, I hope markets are kind to you. Katie
Is the political tide turning in the US?
© FT
Take part in our next live Ask an Expert Q&A with columnists Edward Luce and Rana Foroohar on Thursday November 6.
প্রকাশিত: 2025-10-30 20:13:00
উৎস: www.ft.com
