Excitement over AI stocks has propelled the S&P 500 to record highs, set for a third consecutive double-digit annual gain. AI giants like Nvidia and Alphabet have surged over 30% and 60%, respectively. Lower interest rates have also fueled investor optimism, with the Federal Reserve cutting rates. The historic market momentum suggests potential for declines in 2026.

The AI boom continues with solid earnings growth from tech giants like Nvidia and Amazon. Companies are investing heavily in AI, driving demand for AI products and services. The Shiller CAPE ratio, an inflation-adjusted valuation measure, has reached a high not seen since the dot-com era. This has led to speculation about a possible market bubble.

Despite concerns of a bubble, evidence suggests the AI boom is supported by strong companies and ongoing earnings growth. However, the high Shiller CAPE ratio indicates expensive stock prices, historically leading to market declines. While history points to a potential decline in 2026, quality stocks tend to recover and advance over time.

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Read more at Nasdaq: The Stock Market Is Doing Something Witnessed Only 2 Times in 153 Years — and History Is Very Clear About What May Happen in 2026.