Market Surge Predicted by Dan Niles Amid AI Bubble Warning

Veteran fund manager Dan Niles of the Satori Fund believes the stock market could continue climbing to new highs before the holidays, fueled by optimism over artificial intelligence, strong Q3 earnings, and easier monetary policy.

In his latest commentary, Niles said the market is “melting higher,” driven by what he describes as an inflating AI bubble. He cautioned, however, that the higher valuations climb, the more painful the eventual decline could be.

Niles compared today’s setup to the late stages of the dot-com boom, noting that the S&P 500’s valuation now exceeds levels seen at the 2000 peak. He pointed out that even Greenspan’s famous “irrational exuberance” warning in 1996 preceded several more years of strong market gains, as liquidity and sentiment overpowered fundamentals.

He highlighted that AI-related capital spending by major tech firms like $AMZN, $MSFT, $GOOGL, $META, and $ORCL is expected to top $400 billion in 2025 alone, while AI-native companies such as OpenAI and Anthropic are generating only about $20 billion in revenue — a major imbalance that could become problematic by 2026 if monetization lags.

Despite these long-term concerns, Niles expects continued gains in the near term as the Federal Reserve cuts rates and potentially halts quantitative tightening. He also noted that a new, potentially more dovish Fed leadership could take office in 2026 under President Trump.

For now, Niles said his strategy is to remain positioned to benefit from “too much of a good thing” — acknowledging the bubble’s risk but choosing to ride the rally while it lasts.

Source: Dan Niles, Satori Fund (October 2025 market commentary)