Market Bubble Brewing That Rivals the Roaring ’20s, Warns Top Strategist
By Pamela Heaven, Financial Post — May 25, 2026
A major market bubble reminiscent of the roaring 1920s is taking shape, warns Michael Hartnett, a leading investment strategist at Bank of America (BofA). According to Hartnett, the concentration of technology stocks in the U.S. market is about to reach unprecedented levels fueled by the anticipated public offerings of tech giants such as SpaceX, OpenAI, and Anthropic.
Technology Stocks Dominate Market Concentration
Currently, the dominant seven tech companies in the S&P 500—NVIDIA, Microsoft, Apple, Alphabet, Amazon, Meta Platforms, and Tesla—already constitute more than 44% of the index’s weighting. The introduction of the so-called "Big Three" mega-IPOs is projected to push this figure to nearly 48%, a concentration exceeding many historical market bubbles including those of the roaring ‘20s, the 1970s Nifty 50 era, the Japan bubble of the 1980s, and the technology, media, and telecom (TMT) surge of the 1990s.
Hartnett elaborates in his weekly note, The Flow Show: “Strong price action, retail mania, slumping volatility… so bubbly. Add mega IPOs to AI big boys and market concentration easily surpasses (~48%) bubbles of roaring ‘20s, Nifty 50 ‘70s, Japan ‘80s, TMT ‘90s.”
Only the late 19th-century railroad bubble, reaching 63% market concentration, remains a higher historical benchmark.
Mega-IPOs Driven by Innovation Leaders
SpaceX has already filed for an initial public offering that could become the largest stock market debut in history, potentially with a valuation approaching US$1 trillion. This IPO could occur as early as next month. OpenAI and Anthropic, both prominent artificial intelligence firms, are reportedly preparing to launch their listings by year-end. The combined market capitalization added by these three companies could exceed US$3 trillion, creating a wave of new issuance comparable to the historic IPO surge of 1999. Owen A. Lamont, senior vice president at Acadian Asset Management, describes high net equity issuance as the “Third Horseman of the Bubble Apocalypse.” Although he noted earlier this year that this factor had yet to manifest significantly, the imminent mega-IPOs and the influx of smaller companies are expected to change that rapidly.
IPO Mania Evident in Semiconductor Sector
Investor exuberance is already visible following the recent market debut of semiconductor startup Cerebras Systems Inc. The AI chip designer raised US$6.4 billion—the largest semiconductor IPO in history—and saw its stock surge 68% on the first day of trading, valuing the company at about US$70 billion, rivaling established giants such as General Motors.
Bankers anticipate record-high fundraisings for the year as the market’s appetite for tech equities remains insatiable.
Bubble Signals and Market Outlook
While an IPO wave can signal a bubble, it does not necessarily pinpoint a market peak. Lamont cautions that bubbles can persist for years, citing the Netscape IPO in August 1995, which marked the beginning of the late ‘90s tech bubble, although the market peak did not arrive until over four years later.
Currently, Bank of America’s Bull & Bear Indicator has risen to 8, triggering what is known as a “contrarian sell signal” for risk assets. This signal has occurred 17 times since 2002, often signaling caution but not immediate market reversals. Factors contributing to this indicator include increased inflows into technology and emerging market bonds, a record monthly jump in equity allocations by fund managers, and a drop in cash holdings to 3.9%.
Despite these warnings, Hartnett believes that stock market bulls will remain invested until two key events unfold: the historic IPOs of the Big Three tech companies and a tightening of Federal Reserve policy following a rise in the U.S. consumer price index to between 4% and 5% expected in the coming months. He stated, “Surge in bond yields [is] how booms/bubbles end.”
What to Watch
As investors brace for the arrival of these mega-IPOs and monitor inflation trends, the dynamics between soaring equity valuations and central bank policies will be critical. The confluence of these factors may define whether the current market exuberance transforms into a sustained bubble or a prolonged bull market.
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