The Shiller P/E Ratio of the US Stock Market Reaches a 25-Year Extreme Level, AI Frenzy Sparks Concerns of a Reprise of the 'Internet Bubble'

May 23 — Data shows the U.S. stock market’s 2026 Shiller P/E ratio has risen to roughly 39.5 to 41.7, marking the highest level in 25 years and coming in just below the roughly 44x peak hit during the 1999 internet bubble. Analysts point out this round’s valuation surge is largely driven by the AI theme, with gains fueled by tech giants spanning semiconductors, cloud computing, and AI infrastructure. A handful of large-cap tech stocks have accounted for most of the S&P 500’s gains, stoking concerns the current trend mirrors the 1999 internet bubble. However, a new report argues today’s landscape is distinct from the late 1990s: unlike the host of unprofitable internet firms back then, today’s AI industry leaders boast strong cash flows, mature business models, and high profit margins—providing far stronger fundamental support. The current AI investment frenzy has also expanded into data centers, energy, power grids, and enterprise-level AI applications. Still, analysts warn the market is heavily concentrated on a small group of AI giants. If future interest rates rise, AI commercialization falls short of expectations, or profit growth slows, the U.S. stock market could face valuation compression and volatility risks. Historical data shows that when the Shiller P/E ratio enters a historically high range, the U.S. stock market’s real returns over the next decade typically land in the low single digits.