Happy Third Birthday to the Bull Market

Key Points

• The bull market just turned three years old, and there are rising concerns about historically high valuations and an emerging AI Bubble.  
• The average bull market lasts 2.7 years, meaning this current run could be, by historical standards, entering its latter stages. 
• Looking at three high-beta tech stocks can provide clues about the risks of unbridled enthusiasm.

As economists and pundits continue debating whether stocks are in an AI bubble, the current bull market just turned three years old.

October 14, 2022, marked the bottom of the last bear market, which lasted around nine months. By its end, the Dow dropped 20%, the S&P 500 was 25% lower, and the NASDAQ was down 36%. Since then, it’s been a different story. The major indices have gained 60%, 85%, and 118%, respectively.

But how much more can investors expect amid a backdrop of historically high valuations, subsequently high market concentrations, and ballooning AI investments? Examining past bull market cycles and the behavior of three high-volatility tech stocks can help determine the answer.

At 3 Years Old, This Bull Market’s Long in the Tooth

According to Hartford Funds, bull markets last, on average, 2.7 years with a gain 115%. By comparison, bear markets average a loss of 35% and typically last less than a year. 

There are, of course, anomalies. Before the dot-com bubble burst, the preceding bull market lasted 12 years. Before COVID-19 ended the last bull, investors enjoyed only a year's worth of gains from March 2009 until March 2020. 

Going back to 1928, there have been 27 of each. During those bull markets, the first half of the cycle has outperformed the second half 74% of the time (20 out of 27). So even if this current run isn’t ready to yield to a bear market, statistically, the gains investors see could be waning. 

But what makes this current bull market different from many others is that it’s being propelled by an AI frenzy, which in turn has been drawing comparisons to the dot-com bubble. 

A Tale of Two Bubbles

On Dec. 5, 1996, then-Fed Chairman Alan Greenspan said the market was in a state of “irrational exuberance.” Yet it took more than three years for that bubble to burst in March 2000. While today’s AI-fueled bubble shows some parallels—including exuberance—there are important differences. 

The companies driving the market’s biggest gains today—many of which are Magnificent Seven members—aren’t the speculative startups that caused the dot-com bubble to swell. They’re well-established mega-cap companies with track records of positive earnings growth and reliable revenue. 

They’re also serial acquirers who fortify competitive moats and shield themselves from up-and-coming competitors through mergers and acquisitions activity. According to Callie Cox, chief market strategist at Ritholtz Wealth Management, that has helped differentiate this bull market from the one that ended with the dot-com burst. 

The current bull market has “moved higher on the backs of just a few stocks, with the usual suspects—like small caps—lagging for much of the past few years,” Cox recently wrote in her newsletter. “There’s a graveyard of people who have tried to call for the end of this bull, yet it just keeps pushing forward.”

But markets are cyclical. What goes up must come back down before invariably heading higher again. To better understand what investors are inevitably facing, looking at three AI-leveraged stocks and their inherent risk factors is useful. 

Here’s what Tesla NASDAQ: TSLA, NVIDIA NASDAQ: NVDA, and Palantir NASDAQ: PLTR can tell us about late-cycle bull market investing.   

Clues From 3 High-Volatility Mega-Cap Stocks

As the world’s second-largest EV maker, Tesla doesn’t immediately evoke thoughts of AI.

But it's embracing the technology for autonomous driving systems and the development of Optimus humanoid robots. 

The stock’s also incredibly volatile. When Tesla falls, it falls hard.

From its all-time high (ATH) on Dec. 17, 2024, to its year-to-date (YTD) low on April 8, 2025, it dropped nearly 54%. Conversely, from that bottom, it’s regained 93%. 

For that reason, the stock warrants its beta of 2.09, meaning TSLA is more than twice as volatile as the market. In short, Tesla bulls should be cautious, especially if the market broadly begins slipping. 

From its then-ATH on November 8, 2024, to its YTD low on April 4, 2025, NVIDIA fell 36%.

Since then, it’s up 93% having set a new ATH earlier in October. 

The semiconductor maker—which has arguably factored into the AI bubble more than any other stock—has a beta of 2.12 and is already showing signs of weakness against competitors. 

At 2.60, Palantir has the highest beta of all three.

The AI darling of 2025 has seen peak-to-trough collapses of 10%, 38%, 11% all this year while falling out of favor among institutional investors.

Given runaway valuations vis-à-vis earnings, those three stocks now have forward P/E ratios of 189.34, 28.03, and 215.14, respectively, compared to the S&P 500’s forward P/E of 28. 

On its third birthday, the bull market could have plenty more room to run. Bubbles take time to expand to the point of bursting. But for investors with large positions in the market’s most highly volatile stocks, rebalancing with an eye on safety can’t hurt. Just ask shareholders who owned Yahoo in early 2000.