As economists and pundits continue to debate whether stocks are in an AI bubble, the current bull market has just turned three years old.
October 14, 2022 marked the bottom of the final bear market, which lasted about nine months. By its end, the Dow Jones was down 20%, the S&P 500 was down 25%, and the Nasdaq was down 36%. Since then, the story has been different. The main indices rose by 60%, 85%, and 118%, respectively.
But how much more can investors expect given historically high valuations, thus high market concentrations, and the inflation of AI investments? Examining past bull market cycles and the behavior of three highly volatile technology stocks can help determine the answer.
At 3 years old, this bull market was gone
According to Hartford Funds, Bull markets last an average of 2.7 years With gains of 115%. In comparison, bear markets lose an average of 35% and typically last less than a year.
There are, of course, anomalies. Before the dot-com bubble burst, the previous bull market lasted 12 years. Before the coronavirus ended the recent rally, investors enjoyed just a year’s worth of gains from March 2009 through March 2020.
Going back to 1928, there were 27 of them. During those bull markets, the first half of the cycle outperformed the second half 74% of the time (20 out of 27). So, even if this current trend isn’t ready to succumb to a bear market, statistically speaking, the gains investors see may be diminishing.
But what makes this current bull market different from many others is that it is driven by the AI craze, which in turn has been compared to the dot-com bubble.
A tale of two bubbles
On December 5, 1996, Alan Greenspan, then Chairman of the Federal Reserve, said that the market was in a state of “irrational exuberance.” However, it took more than three years for that bubble to burst in March 2000. Although today’s AI-fueled bubble shows some similarities – including exuberance – there are important differences.
The companies making the biggest market gains today — many of them members of the Magnificent Seven — are not the speculative startups that inflated the dot-com bubble. They are large, well-capitalized companies with track records of positive earnings growth and reliable revenues.
They are also serial acquirers who fortify competitive moats and protect themselves from rising competitors through merger and acquisition activities. According to Callie Cox, chief market strategist at Ritholtz Wealth Management, that helped distinguish this bull market from the one that ended with the dot-com explosion.
“The current bull market has moved higher on the back of a few stocks, with the usual suspects — like penny stocks — lagging for most of the past few years,” Cox recently wrote in her newsletter. “There is a graveyard of people who tried to call the end of this bull, and yet they keep moving forward.”
But markets are cyclical. What goes up must fall before it goes up again. To better understand what investors are up against, it’s helpful to look at three AI stocks and their inherent risk factors.
Here’s what Tesla does Nasdaq: TeslaNvidia Nasdaq: NVDAAnd Palantir NASDAQ:PLTR It can tell us about investing in a late cycle bull market.
Evidence from 3 major high volatility stocks
Tesla today
As of 10/17/2025 at 04:00 PM ET
- 52 week range
- $212.11
▼
$488.54
- P/E ratio
- 253.94
- Price target
- $363.54
As the world’s second-largest electric car maker, Tesla doesn’t immediately conjure up ideas of artificial intelligence.
But it adopts the technology of autonomous driving systems and the development of Optimus humanoid robots.
The stock is also incredibly volatile. When a Tesla falls, it falls hard.
From its all-time high (ATH) on December 17, 2024, to its year-to-date (ATH) low on April 8, 2025, it is down approximately 54%. On the contrary, from this bottom, it recovered 93%.
Nvidia today
As of 10/17/2025 at 04:00 PM ET
- 52 week range
- $86.62
▼
$195.62
- Dividend yield
- 0.02%
- P/E ratio
- 52.20
- Price target
- $222.23
For this reason, the stock warrants its beta of 2.09, meaning TSLA is more than twice as volatile as the market. In short, Tesla bulls should be careful, especially if the market starts to slide broadly.
From the then ATH on November 8, 2024 to its lowest level since the beginning of the year on April 4, 2025, NVIDIA is down 36%.
Since then, it has risen 93% after setting a new ATH earlier in October.
The semiconductor maker — which arguably contributed more to the AI bubble than any other stock — has a beta of 2.12 and is already showing signs of weakness against competitors.
Palantir Technologies Today
Palantir Technologies
As of 10/17/2025 at 04:00 PM ET
- 52 week range
- $40.90
▼
$190.00
- P/E ratio
- 593.85
- Price target
- $141.28
At 2.60, Palantir has the highest beta of the three.
The darling of 2025 has seen peak-to-trough collapses of 10%, 38%, and 11% throughout this year, while falling out of favor among institutional investors.
Given their runaway valuations versus earnings, these three stocks now have forward P/E ratios of 189.34, 28.03, and 215.14, respectively, compared to the S&P 500’s forward P/E ratios of 28.
On its third birthday, a bull market may have more room to run. It takes time for bubbles to expand to the point of bursting. But for investors with large positions in the market’s most volatile stocks, rebalancing with an emphasis on safety can’t hurt. Just ask the shareholders who owned Yahoo in the early 2000s.
Before you consider Tesla, you’ll want to hear this.
MarketBeat tracks the highest-rated and best-performing research analysts on Wall Street and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches up… and Tesla wasn’t on the list.
While Tesla currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.
View the five stocks here
Are you looking to cash in on the huge electric vehicle trend? Enter your email address and we’ll send you our list of EV stocks showing long-term potential.
