Money and Investing: AI stocks boom or bubble – How to back the right horse before the music stops

This week on Money and Investing, Mitch Olarenshaw and I unpack one of the biggest questions in investing right now: Is AI a genuine boom or a bubble waiting to burst?

1. The Dot-Com Parallel

The late 1990s tech explosion saw share prices double and triple almost overnight. When companies failed to deliver on earnings, the market collapsed just as fast. Today’s AI giants, including Amazon, Google, and Meta, are real businesses with real revenue, but the key question remains: can they justify their lofty valuations with actual earnings growth?

2. The Real Deal vs. The Pretenders

Not every AI-branded stock deserves your money. During the dot-com era, Australian mining shells rebranded as tech companies and soared before disappearing entirely. The same co-tailing is happening now. Nvidia stands apart as a company that has genuinely delivered quarter after quarter. Knowing the difference between a true AI business and one riding the wave is critical.

3. The $1 Trillion Capital Expenditure Story

Big tech is committing over a trillion dollars to AI infrastructure over the next three years. The flow-on effects touch construction, data centres, energy, and utilities, creating investment opportunities well beyond the obvious tech plays.

4. Earnings Season Is the Reality Check

US quarterly earnings are where hype meets truth. While the Magnificent 7 ETF has softened and names like Netflix and Tesla have disappointed, the broader AI theme continues to deliver. A wider market base is forming, with companies like Caterpillar slipstreaming into the AI economy.

5. How to Invest Without Backing the Wrong Horse

Diversification is the smartest risk management tool in this cycle. Broad-based ETFs such as MAGS, XLK, and QQQ reduce single-stock exposure. Utilities and energy stocks offer indirect but meaningful AI upside. For the cautious, put options and VIX monitoring can act as portfolio insurance.

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