An update for September 2026

Enthusiasm for artificial intelligence has helped a small number of large technology companies drive much of the US stock market’s recent growth. This has left some investors asking whether AI is in a bubble and whether US shares have become too expensive.

What changed in 2026?

During the first half of 2026, investors became more cautious about the prices of the largest AI-related companies. Money moved into less expensive parts of the market, including energy, industrials and materials. Energy performed particularly strongly, while technology shares came under pressure at several points during the year.[1][2]

Growth and value shares

Growth shares are companies that investors expect to increase their sales and profits quickly in the future. Because of these expectations, investors are often willing to pay a higher price for them today. Many large technology and AI-related businesses fall into this category.

Value shares are companies whose share prices appear modest compared with measures such as their current profits, cash flows or assets. They are often established businesses in sectors such as energy, banking and industrials. These companies may offer attractive opportunities, although a low valuation can sometimes reflect genuine difficulties within a business.

Value shares outperformed growth shares at several points in 2026. In other words, investors moved towards companies valued more on the profits they produce today and away from some businesses whose prices depend more heavily on expectations of rapid future growth.[3][4]

Despite this change in market leadership, the wider US market remained positive. The S&P 500 returned +12.8%, including dividends, in the year to 8 September 2026.[5]

This shows why diversification matters. Spreading investments across different companies, sectors and regions can reduce reliance on a small group of previous winners, although it cannot remove investment risk.

Is the US market expensive?

The S&P 500’s forward price-to-earnings ratio was around 20 to 21 times expected profits in late August 2026, compared with a 10-year average of approximately 19 times.[6][7][8] This measure shows how much investors are paying today for the profits companies are expected to make over the next year.

The difference may look small, but it is still important. When valuations are above their longer-term average, investors are paying more for each unit of expected profit. This can leave less room for disappointment if profits fall short of expectations and may reduce the returns available from the same level of future earnings growth.

Valuation does not tell us when markets will rise or fall. However, the price paid for an investment can have an important effect on its long-term return.

The index is also unusually concentrated. Its 10 largest companies represented approximately 40% of the S&P 500 at various points in 2026.[9] By comparison, the 10 largest companies accounted for roughly 26% to 27% at the peak of the dot-com bubble in 2000.[10]

Other markets may offer a less expensive starting point. The FTSE 100 passed 10,000 points for the first time on 2 January 2026.[11] Its forward price-to-earnings ratio was approximately 13.35 times on 1 January 2026, compared with approximately 20 times or more for the S&P 500.[12]

Is AI different from previous bubbles?

Some AI-related companies are generating substantial sales today. Nvidia reported quarterly revenue of $96.2 billion on 26 August 2026, an increase of 106% from a year earlier. Its Data Centre revenue reached $89.0 billion, up 117%.[13]

This points to real demand for AI computing power, rather than expectations alone. However, high sales do not guarantee lasting profits or justify any price. Investors still need to consider how quickly AI spending will generate profits, whether providers can maintain their prices as competition grows and how supply constraints may affect costs.

Long-term forecasts from J.P. Morgan Asset Management suggest that large US companies could still produce positive returns over the next 10 to 15 years, although they may not lead global markets.[14] These forecasts are estimates, not guarantees, and actual returns may be materially different.

Could markets still fall?

US shares may remain vulnerable to a correction. AI companies could take longer than expected to turn investment into reliable profits. Competition, shortages of advanced computer chips and the energy demands of data centres could place pressure on returns.

Interest rates remaining higher for longer, geopolitical tensions and changes in energy prices could also unsettle markets.

The bottom line

The US market looks expensive compared with its history and is unusually dependent on a small number of companies. This calls for care, but it does not mean that a sharp fall is certain or imminent.

Our approach remains focused on the long term: spreading investments across regions and asset types, favouring financially resilient businesses that generate cash and considering investments that may behave differently when markets become unsettled.

If you are unsure what these developments mean for your investments, please speak to your financial adviser.

Sources

1. Morningstar, 19 February 2026.
2. S&P Dow Jones Indices sector dashboard, 31 July 2026.
3. J.P. Morgan Asset Management, 31 March 2026.
4. StoneX Wealth Management, 19 February 2026.
5. Slickcharts and ChartRow, data to 8 September 2026.
6. Trendonify, 26 August 2026.
7. BlackRock, 7 July 2026.
8. FactSet Earnings Insight and Trendonify 10-year median, August and September 2026.
9. RBC Wealth Management, data to 31 December 2025, and BigGo Finance, late August 2026.
10. ClaritX, citing Forbes reporting, mid-2026.
11. Morningstar, Yahoo Finance UK and Hargreaves Lansdown, all reporting on 2 January 2026.
12. Siblis Research, FTSE 100 P/E and Earnings Growth data.
13. NVIDIA Corporation, Q2 FY2027 results, SEC Form 8-K, 26 August 2026.
14. J.P. Morgan Asset Management, 2026 Long-Term Capital Market Assumptions, 10 September 2026.

Important information

This content is for information only and does not constitute personal financial advice. Please seek professional advice if you are unsure whether a course of action is suitable for you.

The value of investments and the income from them can fall as well as rise, and you may get back less than you invested. Past performance is not a reliable indicator of future performance. Forecasts are not reliable indicators of future performance.