From Innovation to Speculation: AI and the Magnificent Seven

Rerotlhe B. Basele, Peter C.B. Phillips and Shuping Shi
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Rerotlhe B. Basele: Macquarie University
Peter C.B. Phillips: Yale University, University of Auckland, Singapore Management University
Shuping Shi: Macquarie University

No 2537, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The AI boom has driven the Nasdaq and the Magnificent Seven tech stocks to record highs. But how much do these new records reflect underlying value, how much is speculation, and how vulnerable are these stocks and the wider market to a major downturn? Our evidence and analyses show clear signs of bubble exuberance in most of these stocks, concentrated in a few names like Nvidia, leading to latent risks for investors who assume their index funds are safely diversified and supported by wider economic fundamentals.

Date: 2026-06
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