Big Tech Keeps Spending Despite Rising AI Bubble Fears: ETFs in Focus
Bubble fears in artificial intelligence (AI) stocks have been doing the rounds for quite some time now. To add to the woes, a record number of global fund managers now believe that AI stocks are truly in bubble territory, according to Bank of America’s October survey.
About 54% of respondents flagged tech valuations as too high, marking a sharp reversal from last month, when nearly half ruled out such concerns. The latest poll was conducted between Oct. 3 and Oct. 9, and surveyed 166 participants with $400 billion in assets.
Nasdaq 100’s Rally Fuels Valuation Fears
Driven by enthusiasm around AI spending and productivity gains, U.S. stocks have hit multiple records this year. The tech-heavy Nasdaq 100 has surged about 17.6% this year, pushing its forward price-to-earnings ratio to nearly 28 — well above the decade average of 23. This has prompted some investors to question whether earnings expectations justify the rally.
JPMorgan CEO Jamie Dimon also struck a cautious tone on October 14, calling elevated asset prices “a category of concern.”
Mixed Views on Tech Bubble Risk
While some market participants are growing wary, strategists at Goldman Sachs argue it’s premature to fear a full-blown tech bubble. Despite valuation concerns, equity allocations among fund managers have climbed to an eight-month high, indicating underlying optimism.
Still Bullish Tone Not Missing From the Market
Large professional investors entered the fourth quarter as bullish as they’ve been all year, adding to riskier assets for five successive months.
Big Tech Bets Billions on AI Expansion Despite Bubble Worries
Big Tech companies are leaving no stone unturned to make the AI story bigger. Google (GOOGL, GOOG) announced a $15 billion investment in India to build its largest data center hub outside the United States. Meanwhile, AMD (AMD) shares surged on news of a new chip partnership with Oracle (ORCL).
OpenAI, in turn, has inked major chip and infrastructure deals with Broadcom, AMD, Oracle and NVIDIA. Walmart and OpenAI, too, joined forces to expand AI-powered retail tools.
How to Play the Mood in the Market?
Semiconductor ETFs
Semiconductor stocks have been the biggest beneficiaries of the AI boom. Chips facilitate data processing and model training at a massive scale. The more efficient the chips are, the faster and smarter the AI applications become.
Recently, big semiconductor companies inked back-to-back big-ticket deals with AI companies, which is expected to fuel chip ETFs like iShares Semiconductor ETF SOXX. The ETF is up 28.7% this year (as of Oct. 14, 2025).
Utilities ETFs
AI’s huge demand for energy boosts utilities’ growth prospects and the need for power infrastructure. Utilities benefit as data centers and AI operations drive electricity consumption higher. Utilities Select Sector SPDR ETF XLU has added 20% this year (as of Oct. 14, 2025).
Big tech stocks are cash-rich. Most companies have a high cash flow/share ratio. iShares US Technology ETF IYW has added about 22.1% so far this year.
