AI Bubble Fears Return: S&P 500’s Capex Addiction and the Slow Grind to Nowhere

The S&P 500 is staging the slowest, most agonizing correction in recent memory, and the culprit isn’t just war in the Middle East or oil’s 66% moonshot. It’s the market’s AI addiction, and the hangover is starting to bite. A fresh survey (Fool.com) stoked AI bubble fears after revealing that AI-related stocks have accounted for a staggering 90% of the S&P 500’s total capital expenditures since late 2022. That’s not a typo. Ninety percent. For the first time in two decades, professional managers are openly questioning whether the AI trade has simply gone too far, too fast.

If you’re looking for fireworks, you won’t find them in the price action. The S&P 500 is making lower lows and lower highs, but it’s a slow-motion grind rather than a crash. The index is stuck in a technical purgatory, unable to break down, but also unable to rally. The news flow is apocalyptic, oil over $100, Nikkei off 7%, Iran war headlines on loop, but the S&P 500 just keeps leaking lower, like a tire with a slow puncture.

Here’s the kicker: while the world obsesses over oil and war, the real story is the AI capital expenditure binge that has left the rest of the market starved for oxygen. The numbers are eye-watering. Since November 2022, AI stocks have soaked up nearly all the incremental capex in the index. The result? An S&P 500 that looks increasingly like a barbell: a handful of AI mega-caps on one end, and everyone else struggling to breathe on the other.

The technicals are confirming the malaise. The S&P 500 is stuck in a slow grind lower, with each bounce getting sold and each dip attracting only tepid buying. There’s no capitulation, but there’s no conviction either. It’s a market that wants to go down, but can’t quite get there. The options market is pricing in more downside, but not a crash. Volatility is elevated, but not spiking. This is what a slow-motion correction looks like.

The macro backdrop is as hostile as it gets. Oil is up 66% since the Iran war began, and the ripple effects are everywhere. Energy costs are surging, consumer confidence is tanking, and the Fed is still in hawkish mode. The AI trade, which once looked bulletproof, is suddenly looking like a crowded theater with a very small exit.

The historical analog here is the dot-com bubble, but with a twist. Back then, it was speculative capital chasing vaporware. Now, it’s real capex chasing real infrastructure, but the concentration risk is just as acute. If AI stocks stumble, the whole index goes with them. The rest of the market is simply too small to pick up the slack.

The options market is starting to sniff out the risk. Skew is rising, with puts getting bid up as traders hedge against a deeper correction. But there’s no panic. This is a market that’s slowly coming to terms with the fact that the AI party may be winding down.

Strykr Watch

Technically, the S&P 500 is in no-man’s land. The index is making lower highs and lower lows, but the moves are small and orderly. Support sits near 4,900, with resistance at 5,050. The 50-day moving average is flat, and the RSI is drifting toward oversold, but not there yet. Volume is declining, a classic sign of buyer exhaustion. The AI mega-caps are holding up, but breadth is deteriorating fast.

Watch for a break below 4,900 to trigger a sharper move lower. If the index can reclaim 5,050 on strong breadth, the correction may be over. Until then, this is a market to trade, not invest. The options market is pricing in a volatility spike, but not a crash. Implied vols are rising, but still well below panic levels.

Breadth indicators are flashing warning signs. The percentage of S&P 500 stocks above their 50-day average is at multi-year lows. The AI trade is masking weakness everywhere else. If the mega-caps roll over, the index could unwind in a hurry.

The risk is that the AI bubble pops, and the rest of the market isn’t big enough to cushion the fall. The opportunity is to fade the AI trade at the margins, while looking for value in the unloved sectors that have been left for dead.

Strykr Take

The S&P 500 is in the grip of an AI capex addiction, and the slow-motion correction is the market’s way of detoxing. The risk isn’t a crash, but a grinding, demoralizing bleed lower as the AI trade unwinds and the rest of the market fails to pick up the slack. This is a market for nimble traders, not buy-and-hold investors. The next big move will come when the AI mega-caps finally break. Until then, trade the range, hedge your bets, and don’t get caught chasing yesterday’s winners.

datePublished: 2026-03-09 04:45 UTC