Is there a bubble in technology stocks or not? Advisors weigh in

Shares of Dell Technologies surged 101% in May 2026. Micron Technology finished the month 88% higher, barely beating the similarly eyepopping 87% returns of Snowflake and Datadog.

Meanwhile, the VanEck Semiconductor ETF rose almost 20% in May and is up 76% year-to-date. And the Invesco QQQ Trust ETF, which is chock full of technology stocks, is up a hefty 29% since the start of April.

Put simply, advisors are witnessing a massive run-up in technology stocks, the likes of which have not been seen since the dotcom bubble of the late 1990’s. Of course, like all bubbles, that one ended badly, leaving a lot of investors holding the bag.

So are advisors wrestling with another technology bubble? And if so, how can they protect their clients from reliving a fate similar to the popping of the internet bubble?

Alex Tollen, president of McGowanGroup Asset Management, for one, does not see technology stocks in bubble territory, saying earnings momentum is the key driver of the market at this point along with robust GDP growth. Instead, this reminds him of the energy buildout from 2004 to 2014.

“At some point the infrastructure is in and the oversupply causes a re-rate of the companies' stock values,” Tollen said. “Almost all the large infrastructure build out phases in the US has ended with an oversupply, including railroads in the 1800s. That being said, the buildout phases can take a long time.”

Tollen advises investors to closely monitor the rate of change in earnings and overall spend and changes to the underlying GDP inputs. In his view, if a disconnect begins to appear, then exposure should be reduced as valuations will begin to adjust quickly.  

As for helping clients stay invested while managing concentration risk or volatility tied to the tech sector, Tollen utilizes what he calls a “tree and the fruit harvest” strategy, the same strategy that the firm used to navigate the dotcom bubble.

“At each new major high, harvest 10% to 15% of the positions either outright or through call writing or a collar strategy. Then move the proceeds to the safety of an income or value category,” Tollen said.

Matt Moberg, portfolio manager of the Franklin Focused Growth ETF, also believes the market is not currently experiencing a bubble. In his view, the most telling difference from the early 2000s dotcom bubble is the absence of unused infrastructure, as vast amounts of fiber-optic capacity sat idle back then.

“Today, we see the opposite: GPU (graphics processing unit) supply is deeply constrained, and demand has been consistently outpacing availability,” Moberg said.

He adds that valuations also tell a different story. Nvidia, the company most directly tied to the AI buildout, currently trades at approximately 21 times next twelve-month earnings. This is far different from the multiples of key companies from the dotcom Era. For instance, Cisco’s multiple was 126 times next twelve-month earnings on March 31, 2000.

“It is also worth remembering that not all bubbles are financial bubbles. The dotcom period was characterized by sky-high valuations which were largely disconnected from underlying business realities. We do not see that dynamic today,” Moberg said.

According to Moberg, the risk he is watching most carefully is the supply/demand imbalance within the AI ecosystem. He says AI infrastructure remains heavily supply constrained right now. Meanwhile, semiconductor company price increases are driving revenue growth substantially more than volume.

“We would view it as positive if volume growth catches up to price increases, because it would indicate the ecosystem is actually expanding capacity to meet robust demand,” Moberg said.

He’s also watching the pace of AI adoption across the economy. In his view, adoption trends are a leading indicator of any technology’s ability to generate high enough economic returns to support continued re-investment. So far, the signal is positive as consumers have adopted AI at a rapid pace, reaching 100 million users faster than other key internet apps in recent years.

“Use cases have now expanded beyond the consumer to enterprise applications across all sectors of the economy, again supporting our rationale for why this time may be different than prior periods of excess,” Moberg said.

As to how he is helping guide clients through this technological upheaval, Moberg believes that active management plays a vital role.

“We have experienced the rise and fall of many innovation themes — direct-to-consumer in 2016, cryptocurrency in 2017, and the metaverse in 2021, to name a few. Discerning lasting structural trends from short-term hype is central to what we do. Helping clients stay invested through volatility means building portfolios with diverse exposure to innovation across the economy. That hinges on the presence of an active manager with the experience needed to navigate rapid change,” Moberg said.

Finally, Andrew Mathewson, portfolio manager of the ClearBridge Emerging Markets Portfolios, believes that while there are similarities to past speculative periods, there are also very significant differences. Most importantly, he says that the demand for AI is already apparent while supply is constrained, a situation very different from the dotcom era where supply came ahead of demand.

“In the dotcom era, companies built with the idea that demand would come and demand never came. The build today comes from cash or it comes from free cash flow generation, as opposed to some of the debt-driven investment that we saw in the dot-com period,” Mathewson said.

“That doesn't mean that we're not going to be moving into a situation where people are going to start to raise more debt to invest from here. So yes, there are elements that we need to watch out for. We need to maintain vigilance around understanding how demand is going to evolve, how supply is going to evolve,” added Mathewson.