Investment in artificial intelligence (AI) technology stocks is drawing increasing attention amid concerns about market concentration and valuation risks, financial experts say. While some view the current enthusiasm as a speculative bubble, others see it as a driver of technological progress comparable to historic periods of innovation.

Jeremy Grantham, co-founder of asset manager GMO, points to Britain’s railway boom of the 1840s as an example of a bubble that, despite overexpansion and inefficiencies, ultimately transformed society through infrastructure development. Grantham and financial historian Edward Chancellor argue that AI is in a similar category—an innovation wave with potential to yield enduring benefits despite the speculative excesses.

Howard Marks, founder of Oaktree Capital Management, highlights the challenges facing investors in this environment. He notes unresolved questions about the longevity and earnings potential of AI-related assets, including the lifespan of AI chips and the sustainability of growth rates used to price stocks. Marks also raises strategic uncertainties, such as whether artificial general intelligence (AGI) will be achieved and if that milestone will herald further waves of technological change or signal maturity in the field. He questions the prudence of committing to long-term debt investments in hyperscale technology firms amid these unknowns, particularly the ability of capital-intensive projects to generate returns over 30-year horizons.

The volatility observed in recent market activity reflects some of these concerns. SpaceX, for example, debuted publicly on June 12 with a valuation of $1.75 trillion, trading initially at $135 per share. The stock surged to $225 shortly after but then retreated below its IPO price by mid-July. The company’s high valuation despite negative cash flow and ambitious plans to monetize space underscores the speculative nature of some AI-related ventures.

Historical parallels are drawn to the 1920s, when investment trusts proliferated ahead of the 1929 stock market crash. Economist John Kenneth Galbraith observed that these trusts multiplied corporate securities beyond the underlying assets they represented, contributing to financial instability. The modern equivalent, some analysts argue, is the rise of single-stock exchange-traded funds (ETFs), which can amplify volatility and concentration risk.

This phenomenon has had a notable impact on global markets, with South Korea serving as a prime example. Single-stock ETFs focused on semiconductor giants Samsung Electronics and SK Hynix—companies comprising about half of the Kospi index—have generated significant market fluctuations, raising concerns about systemic risk.

For investors, traditional portfolio diversification remains a key tool to manage concentration risk from dominant technology firms—often referred to collectively as the “Magnificent Seven.” However, diversification across countries and asset classes, including property and infrastructure, may be necessary, especially since risk correlations tend to rise during market crises. Despite gold’s historical role as a safe haven, its current high price level limits its appeal, and relatively attractive cash yields make holding more cash an advisable strategy.

Concentration risk is particularly acute in defined contribution pension plans, notably in the United Kingdom, where default investment options frequently include passive funds heavily weighted toward U.S. equities. Such exposure underscores the vulnerability of retirement savings to volatility in a narrow subset of technology stocks.

As investors navigate these dynamics, the enduring caution of economist John Maynard Keynes remains relevant: markets can stay irrational longer than investors can remain solvent. The focus on a small group of AI-related companies has even inspired new nicknames, such as “Mangos,” referencing AI players Meta, Anthropic, Nvidia, Google, OpenAI, and SpaceX, highlighting the concentrated nature of the current technological investment landscape.