The rally comes despite mounting scrutiny over whether AI infrastructure spending can generate sufficient returns and whether stock valuations have reached bubble territory. The S&P 500 Shiller CAPE ratio sits near 41, approaching the record of 44 before the 2000 dot-com crash, while the top 10 companies account for 42% of the index's market capitalization, with Nvidia, Apple and Microsoft alone making up 21%. Only about 29% of S&P 500 constituents have outperformed the benchmark over the past three years, and Broadcom CEO Hock Tan recently warned of growing speculative excess in the AI market.
Monday's bounce follows a 5.5% weekly drop for the Nasdaq 100, its steepest weekly loss since April 2025, which erased $1.9 trillion from US technology stocks last week and more than $3 trillion over 10 days. The selling was concentrated in hardware and chipmakers, with memory stocks falling 18.8% last week, the iShares Semiconductor ETF dropping 11.8% across a nine day losing streak, and the broader technology sector sliding 7.7%, while the S&P 500 fell 2% and the equal weight S&P 500 rose 0.5%.