The S&P 500 has been advancing through a bull market for more than three years, with artificial intelligence (AI) stocks leading the way. Investors got excited about the game-changing nature of this technology and piled into potential winners early to maximize gains. And this proved to be a winning bet in many cases, considering the double- and triple-digit gains of many AI stocks, from Micron Technology to Nvidia.
But, in recent months, investors have become more cautious about AI and the general market, and this is amid various headwinds. These include the ongoing turmoil in Iran, higher prices in the U.S., and questions about the enormous levels of spending poured into the AI build-out. And just this week, the Federal Reserve increased interest rates for the first time in three years to tame inflation. Higher rates equal higher costs for consumers and for companies borrowing to expand, and that could be bad news for corporate earnings growth. At the same time, the overall stock market remains expensive, with valuations at a level they’ve only surpassed once before throughout history.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
All of these elements have prompted some investors to worry about a potential market crash ahead. It’s impossible to predict when the next crash may come, but one thing is certain: Crashes are part of stock market cycles, so one eventually will take place — even if it’s far down the road.
What can you do to prepare? History offers us a valuable piece of advice. If a stock market crash is coming — even well into the future — this is the smartest move you can make.
Image source: Getty Images.
The S&P 500 bull market
So, first, let’s take a look at the S&P 500′s path so far over the past few years. As mentioned, they’ve been great ones for investors. From 2023 through 2025, the index climbed 78%, led by AI stocks. These players, tech giants that we know well, like Nvidia and Alphabet, are heavily weighted in the S&P 500, so moves they make set the pace for the entire index. These players have been early winners of the AI race, as they sell the products and services needed for AI development — as a result, their revenue has exploded higher, and the stock prices followed.
This year, however, investors’ concerns intensified about the pace and depth of spending on the AI infrastructure build-out. Top tech companies have committed more than $700 billion this year alone to the effort. Though demand continues to soar, investors still worry that the future revenue opportunity may not justify this level of investment.
