Why the AI Bubble May Not Burst in 2026

Tech companies have been investing heavily in the development of artificial intelligence (AI) models and technologies in recent years, in what's effectively become the latest arms race in the sector. Even though the payoff from those investments may not necessarily be clear, no company wants to be seen as falling behind its rivals. Thus, spending on all things AI has become intense as a way for companies to show investors they are focused on AI-related growth initiatives.

But lately, many investors have also become concerned that perhaps this has created a bubble, and that there could be a big correction or even crash coming. Many top tech companies are making agreements with one another, creating a circular flow of cash. This suggests that as one big tech company experiences a slowdown in business, others will as well, and that could lead to a crash.

That's the fear, anyway. However, according to one report, a slowdown in AI spending and investments may not necessarily be coming soon. And that could mean that some AI stocks may still have room to rise even higher this year.

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68% of executives plan to spend even more on AI this year

An annual survey from advisory firm Teneo indicates that more than two-thirds (68%) of CEOs are not only planning to continue to invest in AI this year, but they're planning to spend even more than in the previous year. Meanwhile, most of the current AI projects aren't even profitable.

This reinforces the notion that executives would rather continue investing in AI than potentially stop and perhaps admit to their shareholders that they haven't been able to figure out how to make AI generate meaningful gains. To do so might appear to send a bad message to investors and hurt the company's share price.

Will AI stocks continue to rally in 2026?

This recent survey sounds like it may be music to the ears of Nvidia (NASDAQ: NVDA) investors and other big tech companies that are benefiting from a rise in AI-related spending. Demand for Nvidia's AI chips has been through the roof as companies invest in the development of their AI models, and it has made it the most valuable company in the world, with a market cap of around $4.6 trillion.

While it's possible there will be more growth opportunities related to AI this year, some or all of the growth may already be priced into the stock's current valuation. Nvidia, for example, trades at a forward price-to-earnings (P/E) multiple of nearly 25 (which is based on analyst expectations). That's higher than the S&P 500 average of 22. Although that may not be an obscenely high multiple, there is a premium priced into Nvidia's valuation. And for many highly valued AI stocks, the expectation is that they will still benefit from heavy AI spending for multiple years.

Although this survey may appear to be good news for AI stocks and suggest a bubble may not necessarily burst in 2026, that doesn't mean that AI stocks will surge. As of Monday's close, Nvidia's stock was down 11% from its 52-week high, as there has been some apprehension from investors with respect to rising valuations in tech.

Should you invest in AI stocks this year?

It may not be too late to invest in AI stocks, as long as they're not egregiously overvalued, and they have a clear path for more growth. Nvidia is a great example of a company that may still perform well in 2026 due to ongoing demand for chips, and with its valuation looking reasonable given its growth opportunities.

But for other stocks, which may be trading at far higher premiums and whose growth may be a bit more questionable, it may be better to steer clear. Investors do appear to be getting more concerned about rising tech valuations of late, and at the very least, by factoring earnings multiples into your decision-making process, you can ensure you aren't taking on too much risk and basing your investment decisions on best-case scenarios.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.