Are we in a Bubble or Are we Going Higher?

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If you’re new here, I share “buy-and-hold portfolios” that I think can double in 3-5 years. My investment philosophy is simple: Try to find the best stocks I can and let them sit for years. Incur no costs with such a portfolio, and it is simple to manage.

I keep hearing the same narrative everywhere I turn: “We’re in a massive AI bubble.”

CNBC panels debate it.

X is full of bubble warnings.

Financial headlines scream about it.

The fear is palpable.

It makes sense: we’ve all heard the cautionary tales of 2000, and nobody wants to be caught holding the bag when the music stops.

I don’t believe we’re in a bubble.

I think this bull market is very under estimated.

I believe we’re going higher.

What Does The Long-Term Trend Reveal

Let’s start with something visual that should immediately reframe how you think about this market.

This is the NASDAQ 100 on a logarithmic scale from 1985 to today.

Source: Raoul Pal

What you’re seeing is a multi-decade uptrend.

The post-2009 recovery established a steeper trajectory than the pre-1995 period, but both periods have one thing in common: they represent sustainable growth within a trend channel.

The index has trended higher through multiple cycles, multiple Fed regimes, multiple technological revolutions. While the rate of ascent has varied, the pattern of sustained growth within reasonable boundaries has held.

But then there’s that gray box, the 2000 dot-com bubble.

It’s a massive parabolic outlier that broke far above the trend channel.

That wasn’t normal. That was extreme deviation.

Now look at where we are now. In this graph, the NASDAQ is trading at 24,221, and we’re sitting comfortably within the long-term trend channel.

We’re not above it.

We’re not showing parabolic price action that screams unsustainability.

We’re trading exactly within the trend.

In 2000, the bubble was characterized by a violent breakout from the normal trend.

Today, we’re experiencing healthy appreciation within established parameters (so far).

Comparing Now Vs 1995-2000

The magnitude of the moves were totally different.

• From 1995 to 2000, the NASDAQ 100 went up 12x!

• From 2018 to 2025, the NASDAQ 100 is up 4.4x.

• That’s just one-third (ish) of the magnitude of the 2000 bubble.

A 12x move in 5 years versus a 4.4x move in 7 years are very different.

The Valuation Difference.

• The NASDAQ composite PE hit 175 in March 2000.

• Today it’s 40 [source]

• That’s 77% lower!

The speculative frenzy comparison is stark.

• In 2000, there were tens of stocks that went up 10x or more in parabolic fashion.

• Today, yes there have been some impressive winners, but it doesn’t seem like we’re seeing the same level of speculation.

The IPO market tells another important story.

• In 1999/2000, companies were going public at a breakneck pace, many without profits or even revenue.

• Companies with “.com” in their name would see their stock triple on IPO day regardless of their business model.

• They’d raise massive amounts of capital, order infrastructure from companies like Cisco and Sun Microsystems, then unfortunately go bankrupt, leaving suppliers stuck with worthless inventory. That cascade effect devastated the entire tech sector.

• Today? IPO activity is minimal by comparison.

But here’s what really separates today from 2000: profitability and customer quality.

• The dot-com era was filled with cash-burning startups buying infrastructure they couldn’t afford.

• Companies like Pets.com and Webvan were hemorrhaging money with no path to profitability, yet they were valued in the billions.

• Today, Nvidia is driving the market. Its customers are companies like Meta, Google, Microsoft, Amazon, and Tesla, some of the best companies of our time.

• These aren’t speculative ventures hoping to figure out a business model someday.

The Setup For Higher Prices Is Compelling

So if we’re not in a bubble, where are we headed?

Multiple powerful catalysts seem to be converging.

The Fed Catalyst

We are now in a Fed easing cycle at a time when earnings remain strong.

That’s a rare and powerful combination.

In most cycles, the Fed cuts rates because the economy is weakening and we’re heading into recession.

But we’re getting rate cuts in a non-recessionary environment, which is quite bullish for risk assets. (When the cost of capital falls, equity valuations naturally expand.)

Key Data Points

Big tech earnings, greater clarity on US-China trade tensions, and the Fed meeting all happened this week.

Big tech earnings have been solid.

AI spending is still accelerating, and demand shows no signs of slowing down.

US-China trade tensions continue. Yes, there is no trade deal, but we do have a little progress. Xi and Trump actually met. That hasn’t happened since 2019. For now, we have temporary truce.

The Fed announced a cut.

So far, the NASDAQ is higher after digesting all of this information.

That’s bullish.

Add to that: The majority of the S&P 500 is expecting earnings growth next year, averaging mid-teens %.

The AI Infrastructure Buildout

Let’s zoom out a little.

AI isn’t just another tech trend.

It’s a productivity revolution: Think smartphones, the Internet, railroads, the printing press etc.

The infrastructure buildout alone is staggering.

Jensen Huang said: “We’re a couple hundred billion into a multi-trillion infrastructure buildout.”

Let that sink in.

The companies making these investments have the cash flow to support these commitments.

Strong Market Breadth

What’s particularly compelling is the market breadth.

Leading stocks are not just AI companies.

We’re seeing strong stock appreciation from many sectors:

• Space

• Drones

• Biotech

• Chinese stocks

When leading stocks expand across multiple sectors, that’s healthy.

Such breadth is the hallmark of a sustainable bull market.

We’re not seeing the heavy volume selling that typically precedes major tops.

Instead, institutions are stepping in to buy every meaningful dip.

Muted Sentiment

Sentiment also remains muted.

As the market goes up, investors have one foot out of the door.

Any “normal volatility” feels scary.

Bubbles are characterized by euphoria and universal bullishness, not skepticism like we are seeing.

On Risks

Of course, there are risks.

Concentration risk is real.

• 7 stocks represent >30% of the S&P 500.

• Individual investors have the highest equity allocation in U.S. history

• That creates vulnerability.

Leverage exists in the equity ecosystem.

• There are so many Leveraged ETFs.

• I recently saw that someone is trying to bring to market a 5x ETF.

• Options activity has exploded.

• Zero-day-to-expiration options have become very popular.

• This is all in addition to margin debt.

Sure, these are legitimate risks. They are to be aware of and manage, not reasons to exit quality stocks entirely.

Concentration has been a feature of bull markets historically, the biggest winners tend to get bigger as network effects and scale advantages compound.

Yes, that creates risk, but the key difference from 2000 is that these concentrated positions are in genuinely profitable, cash-generative businesses, not speculative ventures.

The leverage in derivatives is concerning, but it’s different from leverage on corporate balance sheets. Companies themselves are in strong financial shape. Their debt-to-equity ratios are healthy. They’re generating free cash flow.

If we see a derivatives-driven selloff, it could create buying opportunities in fundamentally strong companies.

In fact, this is exactly what recently happened in the recent “crypto flash crash”.

What This Means For Your Coffee Can Portfolio

In my opinion, the macro setup supports higher prices.

I’m not saying we can’t see corrections or volatility. We absolutely can. Markets don’t go straight up, and there will be scary headlines and gut-check moments along the way.

I am saying that calling this a “bubble” doesn’t seem right.

For Coffee Can investors, the message is clear: Stay the course. The whole point is to identify great companies and hold them through the volatility. That means living through periods where people scream “bubble!” It means stomaching drawdowns. It means staying invested when the narrative turns negative. Because that’s how you capture the full upside of genuine, multi-year growth stories.

I’m letting my winners run while keeping an eye on fundamentals. If we see a correction, I’ll view it as an opportunity to add to positions that have pulled back, not as validation of bubble warnings. (unless something drastically changes).

The market is always speaking to us. We need to learn how to listen.

And right now, what I’m hearing is we’re not in a bubble.

Unless something drastically changes, the setup for the next 6-18 months looks compelling.

Let’s see where we end up.

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Disclaimer: This is not investment advice.