AI Bubble Index

How to Read the Layer Gauges

The AI Bubble Index measures the alignment between market expectations and business fundamentals across the AI value chain. The index is calculated separately for each value-chain layer, allowing you to see where speculative pressure may be concentrating.

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AI Bubble Index — Aggregate

The Aggregate index is calculated across all 50 companies in the AI Value Chain universe, providing a system-wide view of speculative pressure. It is not an average of the three layers, but rather an independent calculation using the same methodology applied to the entire universe.

The Three Layers

Compute

Physical infrastructure enabling AI workloads — semiconductors, GPUs, specialized chips, and manufacturing capacity.

Platform

Cloud infrastructure, AI model development, developer tools, and orchestration layers between compute and applications.

Application

Companies embedding AI into products and workflows — from productivity tools to vertical-specific solutions.

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What the Gauges Measure

Each gauge measures the degree of alignment between market valuations and underlying business fundamentals within that layer. Higher readings indicate growing divergence; lower readings indicate tighter alignment.

How to Interpret the Bands

• Low (0.00 - 0.25) — Valuations aligned with fundamentals. Market expectations consistent with business performance.
• Moderate (0.25 - 0.50) — Expectations rising faster than fundamentals. Divergence emerging but contained.
• Elevated (0.50 - 0.75) — Speculative pressure building. Valuations running ahead of business performance.
• Extreme (0.75 - 1.00) — Strong divergence. Valuations or momentum significantly elevated relative to fundamentals.

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What This Index Is — and Is Not

The AI Bubble Index is:

• A diagnostic framework for understanding where speculative pressure is concentrating within the AI value chain
• A structural signal that compares market expectations to business fundamentals on a layer-by-layer basis
• A tool for observing divergence patterns across compute, platform, and application companies

The AI Bubble Index is not:

• A market timing tool or crash prediction model
• A stock picking service or investment recommendation system
• A signal about when corrections will occur or how severe they will be
• A substitute for fundamental analysis of individual companies

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Reading the Index

Layer independence matters. A high reading in one layer does not necessarily indicate system-wide bubble conditions. The layers can — and often do — move independently based on their distinct economic drivers and competitive dynamics.

Concentration, not timing. The index shows where speculative characteristics are concentrated, not when market conditions will change. Elevated readings can persist for extended periods.

Context is essential. Interpret each layer's reading relative to its own characteristics, business models, and capital intensity. What constitutes "elevated" in compute may differ from what constitutes "elevated" in applications.

Read them together. Insights emerge from comparing layer readings. Is pressure building uniformly across all layers, or is it concentrated in one? Are compute and platform diverging? These patterns matter more than individual scores.

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For detailed methodology, calculation approach, and data sources, see the Methodology page.