Chip stocks are in a bubble, at least by this definition, says analyst
The definition of a “bubble” is notoriously difficult to pin down. But these analysts applied a Harvard academic’s rubric and found the shoe fits for some popular tech stocks.
The burbling question about whether bubbles have formed in the US stock market seems to have simmered down slightly, as the S&P 500 has stalled out around record highs for the last month and a half or so.
And quantifying exactly how to define what one means by a “bubble” is always tricky, too.
But in a 2017 paper, Harvard economist Robin Greenwood took a close look at market characteristics that may help identify bubbles, finding that high volatility, increased share issuance, and sharp acceleration in gains can help identify high-flying shares that go on to crash.
In a note published Monday, analysts at Ned Davis Research, a well-respected market-watching shop based in Sarasota, Florida, applied some of those proposed analytical criteria to individual stocks, finding a few clear candidates for bubble status, including retail favorites like Palantir, Nvidia, and Broadcom, among others. They wrote:
“The Greenwood study was specifically designed to identify bubbles at the industry level. However, we borrowed the bubble definition and applied it to S&P 500 stocks as an objective measure of ‘unusually large’ price returns...
On October 30, 2025, the peak for the current cycle, we found 5.8% (29) of S&P 500 companies met the bubble criteria. Note the peak percent of companies in a bubble in 2000 was much higher at 9.2% (46 companies).
In the table [below] we highlight the 29 companies (17.9% of S&P 500 market cap) that met the bubble criteria as of October 30, 2025. We believe 18 of 29 are AI related. Interestingly, none of the MAG 7 except NVIDIA meet our bubble criteria. However, observe the concentration in semiconductor stocks.”
The analysts stressed that even if one were able to identify bubbles, that’s different than knowing when such financial prices will plunge — i.e., when to sell.
But, they concluded, “if we are in a bubble, it is being led by Nvidia and Semiconductors.”
