In November 2025, concerns about an AI industry bubble have rapidly intensified, becoming a focal point for global financial markets. From tech company CEOs to Wall Street investment banks, various parties are issuing warnings about astronomical valuations of AI-related stocks, worried this AI boom might replay historical tech bubble crashes.
Sky-High Valuations Trigger Market Alert
Current AI sector valuations have reached jaw-dropping levels, prompting markets to question whether these numbers reflect real value.
Nvidia: $5 Trillion Valuation Milestone
Semiconductor giant Nvidia reached a historic $5 trillion market capitalization in November 2025, becoming one of the world’s most valuable companies. This figure exceeds Germany’s annual GDP, highlighting the astonishing growth driven by AI chip demand.
However, such massive valuation also raises questions: Can AI infrastructure demand truly support such high valuations? Are chip depreciation costs being underestimated?
Palantir: P/E Ratio Soars to 700x
Data analytics company Palantir Technologies’ valuation is even more extreme. Analysts point out the company’s price-to-earnings (P/E) ratio has reached 700x, far exceeding reasonable ranges for traditional tech companies.
For context, mature tech companies typically have P/E ratios between 20-40x, making Palantir’s valuation level indicate extreme market optimism about AI data analytics.
Wall Street Financial Giants Issue Warnings
Financial institution leaders’ concerns about AI valuations are deepening, with public warnings to investors about risks.
Goldman Sachs CEO: Market Correction “Likely”
Goldman Sachs CEO David Solomon warned that a 10-20% market pullback is “likely” within the next two years. These words from the leader of one of the world’s largest investment banks carry significant weight.
Solomon pointed out that current tech company valuations have reached historic highs, with some companies’ market caps difficult to explain with fundamentals, making market correction only a matter of time.
Morgan Stanley CEO: Valuations at Historic Highs
Morgan Stanley CEO Ted Pick expressed similar concerns, warning that some major tech companies’ valuations have reached historic highs and investors should carefully assess risks.
These warnings from financial institution leaders are not unfounded. They witnessed the 2000 dot-com bubble and 2008 financial crisis, having deep understanding of consequences from excessive market optimism.
Michael Burry: “Big Short” Warns Again
Investor Michael Burry, famous for successfully predicting the 2008 financial crisis, has joined the warning chorus. He accused major AI infrastructure and cloud service providers of understating chip depreciation expenses, suggesting profits at companies like Oracle and Meta may be severely overstated.
Burry believes these companies’ financial reports don’t adequately reflect true costs and depreciation speed of AI chips, and stock prices could significantly correct once markets reassess these costs.
Tech CEOs Publicly Admit Concerns for First Time
More notably, tech industry leaders themselves are beginning to express concerns about AI valuations. This signals warnings no longer come only from external investors but from inside the industry.
DeepL CEO: Valuations “Pretty Exaggerated”
German AI company DeepL CEO Jarek Kutylowski stated bluntly at the Lisbon Web Summit: “I think the evaluations are pretty exaggerated here and there, and I think there is signs of a bubble on the horizon.”
These words from an AI industry insider show that even company leaders benefiting from the AI boom feel uneasy about current valuation levels.
Industry Self-Reflection
Previously, warnings about excessive valuations mainly came from investors and finance. Now tech company CEOs are joining the warning chorus, reflecting the industry’s self-reflection and concerns that excessive hype might harm long-term development.
This self-awareness is a healthy signal but also highlights that market frenzy has reached levels making even industry insiders uncomfortable.
Market Already Showing Correction Signs
Warnings are not empty talk; markets have already begun showing adjustment signs.
Early November Global Stock Market Decline
In early November 2025, global stock markets covering the US, Asia, and Europe experienced sharp declines, with markets directly attributing the cause to fears of an AI bubble bursting.
The Nasdaq Composite Index fell 3% in a single week, marking its worst performance since President Trump’s comprehensive tariff plan announcement in April 2025, potentially signaling wavering investor confidence in AI.
AI-Related Stocks Hit Hard
The hardest hit were AI-related companies:
- Palantir: Down 11%
- Oracle: Down 9%
- Nvidia: Down 7%
These companies are all beneficiaries and representative firms of the AI boom, with major stock price drops showing markets beginning to reassess AI investment risks and rewards.
”Vibe Revenue”: AI Companies’ Profitability Challenge
CNBC reports introduced the “Vibe Revenue” concept, describing the disconnect between AI company valuations and actual revenue.
Huge Gap Between Valuation and Revenue
Many AI startups receive astronomical valuations, but actual revenue and profitability are far below valuation levels. Investors are betting on “future potential” rather than “current performance.”
This investment logic is not uncommon in early-stage startup industries, but when the entire industry adopts this model and valuation scales reach trillion-dollar levels, risks increase significantly.
Can AI Survive the Hype Cycle?
At the Lisbon Web Summit, AI company CEOs admitted that after billions of dollars poured into AI, there are doubts within the industry about whether this technology can survive the end of its hype cycle.
This reflects the core challenge facing the AI industry: How to translate technological breakthroughs into actual commercial value? How to prove current investment scales are reasonable?
Rapid Growth of AI-Native Applications
Despite bubble concerns, the AI industry has also demonstrated impressive actual results.
$100 Million ARR Milestone
A new generation of AI-native applications reached $100 million in annual recurring revenue (ARR) within just a few years, something that previously took decades. These companies grow with incredible efficiency, achieving the highest revenue per employee ever seen for software companies.
This proves AI is creating real value; the question is whether valuations reasonably reflect that value.
Efficiency Revolution
The highly efficient operating models demonstrated by AI-native companies may redefine how the tech industry creates value. Small teams achieve through AI tools what previously required large organizations.
Historical Bubble Warnings
The current AI boom shares many similarities with historical tech bubbles.
2000 Dot-Com Bubble
During the 2000 dot-com bubble period, investors similarly held extremely optimistic attitudes toward new technology, with many companies receiving valuations far exceeding actual value. When the bubble burst, the Nasdaq index plummeted nearly 80% from its peak.
Similar Market Psychology
Current markets exhibit characteristics similar to the dot-com bubble period:
- Frenzied pursuit of new technology
- Valuation logic ignoring fundamentals
- “This time is different” optimism
- Rapidly rising stock prices attracting more speculative capital
Bubble or Real Value? Key Questions
Determining whether AI is experiencing a bubble requires answering several key questions.
1. How Much Real Value Can AI Create?
AI technology is indeed powerful, but can it create commercial value in the short term sufficient to support current valuations? Many applications are still experimental, with immature business models.
2. When Will Investment Returns Materialize?
AI infrastructure requires massive investment. When will these investments bring corresponding returns? If returns are delayed, investor patience may run out.
3. Is Market Demand Real?
Is demand for AI chips and services genuine enterprise need, or bubble demand generated by “fear of falling behind”?
4. How Will Competitive Landscape Evolve?
As more companies enter AI, intensified competition may compress profit margins. Can current leaders maintain advantages?
Investor Strategies
Facing AI bubble concerns, how should investors respond?
1. Diversify Investment Risk
Don’t concentrate all funds in AI-related stocks; diversify across different industries and asset classes.
2. Focus on Fundamentals
When evaluating companies, emphasize actual revenue, profitability, and cash flow rather than just growth potential.
3. Long-Term Investment Perspective
If believing in AI’s long-term value, short-term volatility shouldn’t affect investment strategy. But be mentally prepared for possible significant corrections.
4. Carefully Assess Valuations
A company with 700x P/E ratio could be the next Google or the next bankrupt bubble company. Deep research and judgment are needed.
Necessary Adjustment for Healthy Industry Development
Market correction isn’t necessarily bad; it might be a necessary process for healthy industry development.
Eliminate Non-Value Companies
Bubble bursts eliminate companies relying only on hype without real value, concentrating resources on truly innovative enterprises.
Return to Rational Valuations
Valuation corrections will force markets to more rationally assess AI companies’ true value, helping long-term healthy industry development.
Consolidate True Winners
Companies surviving market tests will become true industry leaders with stronger competitiveness and business models.
Conclusion
AI bubble concerns peaked in November 2025, with concerns expressed from Wall Street to Silicon Valley, from investors to tech CEOs, about astronomical valuations. Nvidia’s $5 trillion market cap, Palantir’s 700x P/E ratio, and actual market correction signs all point to possible bubble risks.
However, AI is indeed creating real value, with the new generation of applications demonstrating amazing efficiency and growth rates. The question isn’t whether AI has value, but whether current valuations are excessively ahead.
History tells us revolutionary technologies often accompany valuation bubbles, but truly valuable companies will ultimately stand out. Investors need to find balance between optimism and caution, focusing on fundamentals rather than just chasing trends.
The coming months will be a critical observation period. Can markets digest current valuations? Can AI companies prove their value? Or will history repeat the 2000 dot-com bubble crash script? The answer will profoundly impact the tech industry and global financial markets’ future direction.
