Episode Details

Many investors are wondering whether the market is getting ahead of itself, especially when it comes to artificial intelligence and technology stocks.

But perhaps the better question is not, “Are we in a bubble?” The better question may be, “How should we respond if we are?”

That was the focus of today’s conversation with Mark Biller, Executive Editor and Senior Portfolio Manager at Sound Mind Investing. With AI continuing to drive market enthusiasm, many investors are feeling both excitement and concern. The challenge is learning how to respond with wisdom rather than fear.

Why Investors Are Concerned About AI and Tech

The AI story has been driving markets for several years. One clear example is the tech-heavy Nasdaq, which has risen sharply since the end of the 2022 bear market. More recently, many companies have reported rapid profit growth and have credited AI as a key factor.

That has encouraged investors because it shows AI is not merely hype. Companies across many industries are beginning to see real benefits from AI tools, including improved efficiency and increased profitability.

At the same time, the demand for AI computing power has caused certain sectors—especially semiconductor stocks—to soar. When any part of the market begins rising almost straight up, investors naturally become nervous. It brings to mind previous market manias that ended in painful declines.

Is This Really a Bubble?

Calling a bubble in real time is extremely difficult. Even when someone identifies one correctly, acting on that information too early can be costly.

Mark pointed to the late 1990s internet bubble as an example. Many investors suspected that Internet stocks were overheated long before the bubble actually burst. Federal Reserve Chairman Alan Greenspan famously warned about “irrational exuberance,” but that warning came more than three years before the market peak. Investors who sold immediately missed significant gains before the downturn finally arrived.

That illustrates an important point: even if a bubble is forming, that does not tell investors exactly what to do or when to do it.

Markets are forward-looking. Investors are pricing companies not only on current earnings but also on what they believe those companies may earn in the future. If expectations rise dramatically, stock prices often rise with them.

So it is possible that some parts of the market, such as semiconductor stocks, may be showing bubble-like characteristics while the broader market does not look as overheated. But the practical question remains: how should investors respond?

Avoid Fear-Based Market Timing

Most investors would love to avoid downturns without missing the upside. But in practice, that kind of market timing is extremely difficult.

Investors often make one of two mistakes. Some sell too early and miss major gains. Others wait too long and sell only after stocks have already fallen, and fear has taken over.

That is why a disciplined plan matters. Instead of trying to predict the exact top of the market, wise investors focus on staying invested while managing risk thoughtfully.

Historically, some of the market’s strongest gains occur late in bull markets. That does not mean investors should ignore risk, but it does mean that fear-based decisions can be costly.

Diversification Still Matters

One of the most practical ways to manage risk is through diversification.

A well-balanced portfolio helps reduce the risk of becoming overly exposed to a single hot sector. Mark offered a helpful way to think abo