Those fears increased last week after tech stocks fell sharply, driven by concerns over debt-funded AI spending and worries over a hawkish U.S. central bank

Soaring stock market valuations, swings in the market value of trillion-dollar companies, and periodic sharp ​selloffs have fuelled growing concerns that parts of the U.S. stock market may be in a bubble.

Investors have long been sceptical of the astronomical gains ‌in AI and semiconductor stocks, questioning whether U.S. stock market is inflating another speculative bubble.

Those fears increased last week after tech stocks fell sharply, driven by concerns over debt-funded AI spending and worries over a hawkish U.S. central bank.

Stocks have steadied as investors see sentiment, broadening market participation and solid earnings supporting the rally — but concerns remain.

Looking through the lens of valuations, positioning, and sentiment, all measures of asymmetry and risk are ​flashing amber, said Oliver Shale, investment specialist for the U.S. at Britain-based Ruffer.

Some measures of valuation have scaled near-record highs while certain sentiment gauges are flying high.

None ​of this is to say that the end is nigh, but that is a fragile setup for any market, Shale said.

Indeed, BofA Global ⁠Research’s proprietary Bubble Risk Indicator, which scores assets on a scale of 0 to 1, with 1 signalling extreme bubble-like price action, stands at 0.91 for the PHLX Semiconductor ​Sector and 0.82 for the Technology Select Sector.

The U.S. stock market’s valuation has reached levels historically associated with major downturns, as measured by the Buffett Indicator — named after investor Warren Buffett.

The ​indicator, which compares total U.S. stock market capitalization with gross domestic product, stood at 218% for the first quarter, just short of the record high of 219% touched in the prior quarter.

Nearly every S&P 500 valuation metric is ​higher than it’s ever been except, possibly, PE ratios, said Mark Spiegel, managing member and portfolio manager at Stanphyl Capital Partners.

While the S&P 500 price-to-earnings ratio, the most widely cited ​valuation metric for equities, has not reached the extreme levels seen during past market bubbles — supported in part by robust earnings growth — some investors remain sceptical.

There’s a solid argument that the ‘E’ (earnings) in those ‌ratios is an ⁠unsustainable bubble in itself, Spiegel said.

The S&P 500’s price-to-earnings ratio stands at 20.2 times expected 12-month earnings, compared with 25.2 during the dotcom bubble, according to LSEG Datastream.