10 Biggest US Stock Market Bubbles Ranked: 1929 to 2026
Stock market bubbles are easier to identify in retrospect than in real time. We are sitting in May 2026, with Nvidia having crossed a five trillion dollar market capitalization, with the Magnificent 7 making up nearly thirty percent of the S&P 500, and with the Shiller cyclically-adjusted P/E ratio above 40 for only the second time in 145 years of US stock market data. So we ranked the ten biggest US stock market bubbles ever, from the 1929 Wall Street crash that triggered the Great Depression to the AI mania we are currently inside, looking at peak-to-trough drawdowns, recovery times, and the lessons that did or did not transfer from one bubble to the next. The current AI bubble lands at number three on the list, and we explain why.
US Stock Market History
Every Major Stock Bubble in US History, Ranked
From the Roaring Twenties to today's AI mania, ranked by drawdown depth, recovery time, and how badly they broke the people who held on.
10
Bubbles Ranked
89%
Worst Drawdown (1929)
25 yrs
Longest Recovery
1
Currently Inflating
Stock market bubbles all look identical at the peak and identical on the way down. The mood at the top is always the same: this time it really is different, the old valuation rules do not apply, the new technology will reshape the economy, and anyone who is not buying is going to miss it. The mood at the bottom is also identical: shock, disbelief, anger at the people who saw it coming, and a vow to never make this mistake again. The vow lasts about a generation. Then a new technology shows up, the rules feel like they have changed, and we do the whole thing over.
I have been writing about markets since 2003, which means I have been a working observer of two major bubbles (the dot-com hangover, and the 2007 housing/financial bubble) and have watched a few smaller ones inflate in real time (cannabis, SPACs, meme stocks, crypto). I am writing this in May of 2026, with Nvidia's market capitalization having crossed five trillion dollars, with the Magnificent 7 making up roughly 34% of the entire S&P 500, and with the Shiller CAPE ratio sitting north of 40 for only the second time in its 145-year history. So the question of which bubbles in US history have been the worst is, frankly, more than academic right now.
What follows is a ranked list of the ten biggest US stock market bubbles ever. The ranking weights drawdown depth, length of recovery, breadth across the market, and how meaningful the resulting wealth destruction was. The list focuses on stock market bubbles specifically, not real estate or commodity bubbles (so no Florida 1925-26, no 1869 gold corner). At the end I will explain why the AI bubble lands where it lands, and why I am writing this article instead of buying more Nvidia.
The most uncomfortable thing about being inside a bubble is that you cannot tell whether it is a bubble until later. There is no horn that sounds at the top. The peak is just another day. The shoeshine boys giving stock tips, the magazine covers proclaiming the death of value investing, the celebrity fund managers being interviewed on the morning shows: those are signals, but they are signals that something might be wrong, not certainty. The smart move is usually not to be all-in or all-out, but to be calibrated. Don't let any single position get to a size where a 75% drawdown ends your story. That advice does not change across bubbles. It is just easier to give than to follow.
The 1929 bubble is #1 on this list because of the depth of its drawdown and the length of its recovery. The dot-com bubble is #2 because of its scale of wealth destruction. The AI bubble is #3 because the dollars at stake make it the largest in absolute terms even though no drawdown has happened yet. None of those rankings will look quite right in five years. The list will be reordered. New bubbles will be added. The lessons will be the same.
I have been writing about markets since 2003, which means I have been a working observer of two major bubbles (the dot-com hangover, and the 2007 housing/financial bubble) and have watched a few smaller ones inflate in real time (cannabis, SPACs, meme stocks, crypto). I am writing this in May of 2026, with Nvidia's market capitalization having crossed five trillion dollars, with the Magnificent 7 making up roughly 34% of the entire S&P 500, and with the Shiller CAPE ratio sitting north of 40 for only the second time in its 145-year history. So the question of which bubbles in US history have been the worst is, frankly, more than academic right now.
What follows is a ranked list of the ten biggest US stock market bubbles ever. The ranking weights drawdown depth, length of recovery, breadth across the market, and how meaningful the resulting wealth destruction was. The list focuses on stock market bubbles specifically, not real estate or commodity bubbles (so no Florida 1925-26, no 1869 gold corner). At the end I will explain why the AI bubble lands where it lands, and why I am writing this article instead of buying more Nvidia.
What we are working with
Here is the master list. Ten bubbles, summarized by year of peak, peak index level, trough, drawdown percentage, and recovery time. The current AI/Mag 7 bubble has no trough yet because it has not popped, so its row is necessarily incomplete.| # | Bubble | Peak | Trough | Drawdown | Recovery |
|---|---|---|---|---|---|
| 1 | 1929 Stock Market Bubble | Sept 1929 | July 1932 | -89% | 25 yrs |
| 2 | Dot-com Bubble | March 2000 | Oct 2002 | -78% | 15 yrs |
| 3 | AI / Magnificent 7 Bubble | 2026 (ongoing) | TBD | TBD | TBD |
| 4 | Subprime / Financial Bubble | Oct 2007 | March 2009 | -57% | 5.5 yrs |
| 5 | Nifty Fifty | Dec 1972 | Oct 1974 | -48% | 7.5 yrs |
| 6 | Meme Stock Bubble | Jan 2021 | 2023+ | -95% | Ongoing |
| 7 | SPAC Bubble | Feb 2021 | 2023+ | -75% | Ongoing |
| 8 | Late 1960s Go-Go Years | Dec 1968 | May 1970 | -36% | 3 yrs |
| 9 | Cannabis Stock Bubble | Sept 2018 | 2020+ | -97% | Never |
| 10 | 1987 Bull Market | Aug 1987 | Oct 1987 | -23% | 1.8 yrs |
Peak-to-Trough Drawdowns
How deep each bubble cut, ranked by maximum drawdown of the most-affected index or stock
The deepest drawdowns are not always the biggest bubbles. Cannabis stocks fell harder than Dow 1929, but the wealth destruction was orders of magnitude smaller. Scale matters as much as percentage.
10. The 1987 Bull Market Peak
10
August 1987 Peak · Black Monday Oct 19
Dow Jones Industrial Average · -22.6% in a single day
-23%
Total Drawdown
Pre-Internet Era The 1987 entry on this list is the lightest in terms of drawdown, but it earns its spot because of the speed and the educational value. The Dow rose from around 777 in August 1982 to 2722 on August 25, 1987, a triple in five years. The market environment was a mix of the new (computer-driven program trading, portfolio insurance) and the old (margin debt at multi-decade highs, retail enthusiasm).
Then on October 19, 1987, the Dow fell 22.6% in one trading session. That is still the largest single-day percentage decline in NYSE history. The trigger has been debated for forty years, but the consensus is that portfolio insurance, a hedging strategy that involved selling index futures as the market dropped, created a feedback loop that accelerated the selling far beyond what the underlying news justified.
What makes 1987 the smallest bubble on this list is also what makes it the most reassuring: the recovery was the fastest. The Dow regained its August 1987 peak in less than two years. The economy did not enter a recession in 1988. The financial system, despite an enormous one-day shock, did not break. This is the bubble that taught a generation of money managers that crashes do not always cause depressions.
Then on October 19, 1987, the Dow fell 22.6% in one trading session. That is still the largest single-day percentage decline in NYSE history. The trigger has been debated for forty years, but the consensus is that portfolio insurance, a hedging strategy that involved selling index futures as the market dropped, created a feedback loop that accelerated the selling far beyond what the underlying news justified.
What makes 1987 the smallest bubble on this list is also what makes it the most reassuring: the recovery was the fastest. The Dow regained its August 1987 peak in less than two years. The economy did not enter a recession in 1988. The financial system, despite an enormous one-day shock, did not break. This is the bubble that taught a generation of money managers that crashes do not always cause depressions.
2722
Dow Peak
-22.6%
Black Monday
1.8 yrs
To Recovery
3x
5-Year Run-Up
9. Cannabis Stock Bubble (2018-2019)
9
Tilray, Canopy, Aurora, Cronos, Hexo
Peak September 2018 · Tilray traded as high as $300/share
-97%
Tilray Drawdown
Sectoral Mania This one is small in dollar terms compared to the rest of the list, but it is a perfect case study of how a sectoral bubble inflates and pops. Canada legalized recreational cannabis in October 2018, and US investors poured into the publicly-traded Canadian licensed producers, expecting the same legal framework to roll into the United States within a year or two.
Tilray went public in July 2018 at $17 per share. Within two months, it had hit $300, briefly making it the most valuable cannabis company in the world at a market cap above $20 billion. Canopy Growth, the largest of the bunch, reached a peak market cap of around $24 billion, with annual revenue of less than $80 million. The math never made sense.
What followed was an industry-wide collapse. Tilray bottomed at under $4. Aurora Cannabis went from a peak around $130 (split-adjusted) to under $1. Cronos and Hexo followed similar paths. The sector lost more than 95% of its market cap from peak to trough, and it has never come back. Even now, more than seven years later, the major cannabis names trade at a fraction of their 2018 highs. US legalization, the catalyst the bubble priced in, never arrived.
Tilray went public in July 2018 at $17 per share. Within two months, it had hit $300, briefly making it the most valuable cannabis company in the world at a market cap above $20 billion. Canopy Growth, the largest of the bunch, reached a peak market cap of around $24 billion, with annual revenue of less than $80 million. The math never made sense.
What followed was an industry-wide collapse. Tilray bottomed at under $4. Aurora Cannabis went from a peak around $130 (split-adjusted) to under $1. Cronos and Hexo followed similar paths. The sector lost more than 95% of its market cap from peak to trough, and it has never come back. Even now, more than seven years later, the major cannabis names trade at a fraction of their 2018 highs. US legalization, the catalyst the bubble priced in, never arrived.
$300
Tilray Peak (Sept 2018)
$24B
Canopy Peak Mkt Cap
-97%
Tilray Drawdown
7+ yrs
Still Below Peak
8. Late 1960s "Go-Go Years"
8
Conglomerate Mania · Performance Funds
Peak Dec 1968 · LTV, ITT, Litton Industries
-36%
S&P Drawdown
Pre-Internet Era The forgotten bubble. The Go-Go Years were named for the fast-trading "performance funds" of the late 1960s, run by celebrity managers like Gerald Tsai (Manhattan Fund) and Fred Carr (Enterprise Fund). The investment thesis was that picking volatile, momentum-driven growth stocks could deliver 20%+ annual returns indefinitely.
Underneath the fund-management mania, the underlying stocks driving the era were the conglomerates: companies like Ling-Temco-Vought (LTV), International Telephone & Telegraph (ITT), Litton Industries, and Gulf+Western. These conglomerates rolled up unrelated businesses on the theory that diversification itself created value. They funded the rollups with stock and convertible bonds priced on the bubble valuations they had created. The whole structure was financial alchemy: as long as the stock kept rising, the math worked.
The S&P 500 peaked in December 1968 and fell roughly 36% by May 1970. The conglomerates fell harder. LTV lost more than 90% of its peak value. Most of the celebrity performance fund managers had blown out their funds by 1973-74 (Manhattan Fund, which Tsai had sold near the peak, lost most of its value over the decade). The lesson was that financial engineering is not the same as creating value, and that fund managers who beat the market by buying the most volatile stocks tend to underperform when volatility goes the other way.
Underneath the fund-management mania, the underlying stocks driving the era were the conglomerates: companies like Ling-Temco-Vought (LTV), International Telephone & Telegraph (ITT), Litton Industries, and Gulf+Western. These conglomerates rolled up unrelated businesses on the theory that diversification itself created value. They funded the rollups with stock and convertible bonds priced on the bubble valuations they had created. The whole structure was financial alchemy: as long as the stock kept rising, the math worked.
The S&P 500 peaked in December 1968 and fell roughly 36% by May 1970. The conglomerates fell harder. LTV lost more than 90% of its peak value. Most of the celebrity performance fund managers had blown out their funds by 1973-74 (Manhattan Fund, which Tsai had sold near the peak, lost most of its value over the decade). The lesson was that financial engineering is not the same as creating value, and that fund managers who beat the market by buying the most volatile stocks tend to underperform when volatility goes the other way.
Dec 1968
S&P Peak
-36%
S&P Drawdown
-90%
LTV Drawdown
3 yrs
To Recovery
7. SPAC Bubble (2020-2021)
7
Special Purpose Acquisition Companies
Peak Feb 2021 · ~$160B raised across 600+ SPACs
-75%
De-SPAC Index
Modern Era The COVID-era SPAC mania was a structural bubble. Special Purpose Acquisition Companies are shell companies that raise money in an IPO with no business other than to merge with a real (private) company within two years. SPACs had been around for decades as a niche product, but in 2020-2021 they exploded.
In 2020, more than 240 SPACs went public, raising around $80 billion. In just the first quarter of 2021, another 300 SPACs went public, raising another $90 billion. Total cumulative raise across the bubble was around $160 billion. The structure was abused mostly by sponsors (the people who launch the SPAC) at the expense of public shareholders, because the sponsor typically received 20% of the post-merger company essentially for free.
When the SPACs found targets, the targets were often pre-revenue companies in speculative sectors: electric vehicles, vertical takeoff aircraft, hydrogen fuel, space exploration, online gambling. The merged entities (called "de-SPACs") delivered some of the worst returns of any IPO cohort in history. The CIIG/CNBC SPAC Index fell roughly 75% from its February 2021 peak by 2023, and most of the deal-day-zero SPAC sponsors are now in or near bankruptcy. The 2020-21 SPAC wave incinerated tens of billions of dollars of retail money.
In 2020, more than 240 SPACs went public, raising around $80 billion. In just the first quarter of 2021, another 300 SPACs went public, raising another $90 billion. Total cumulative raise across the bubble was around $160 billion. The structure was abused mostly by sponsors (the people who launch the SPAC) at the expense of public shareholders, because the sponsor typically received 20% of the post-merger company essentially for free.
When the SPACs found targets, the targets were often pre-revenue companies in speculative sectors: electric vehicles, vertical takeoff aircraft, hydrogen fuel, space exploration, online gambling. The merged entities (called "de-SPACs") delivered some of the worst returns of any IPO cohort in history. The CIIG/CNBC SPAC Index fell roughly 75% from its February 2021 peak by 2023, and most of the deal-day-zero SPAC sponsors are now in or near bankruptcy. The 2020-21 SPAC wave incinerated tens of billions of dollars of retail money.
$160B
Total Raised
600+
SPACs Listed
-75%
De-SPAC Index
5 yrs
Still Below Peak
6. Meme Stock Bubble (2021)
6
GameStop, AMC, BBBY, KOSS, BlackBerry
Peak Jan 2021 · GameStop $483 intraday high
-95%
GameStop Drawdown
Modern Era The most viral bubble in American stock market history. Driven by retail traders coordinating on Reddit (r/wallstreetbets), Discord, and Twitter, the meme stock bubble of January 2021 turned struggling brick-and-mortar retailer GameStop from a $5 stock in August 2020 into a $483 stock by January 28, 2021. The squeeze was real: short interest in GameStop had exceeded 100% of the float, and the buying pressure forced hedge funds with short positions to cover at any price.
This was a cultural moment as much as a financial one. Robinhood, the brokerage that hosted most of the retail buying, halted purchases of GameStop and other meme stocks on January 28, 2021, citing capital requirements at its clearinghouse. Multiple Congressional hearings followed. The hedge fund Melvin Capital, one of the largest GameStop short-sellers, lost more than $6 billion in January 2021 and shut down completely by 2022.
The post-peak collapse was almost as fast as the rise. GameStop has spent the years since trading in a wide range, but never again at the January 2021 highs. AMC, BBBY (which went bankrupt in 2023), Koss, BlackBerry, and other meme names followed similar patterns: a furious rally to nonsense valuations, a brief consolidation, and then a slow decline back to fundamentals (or to zero, in the case of Bed Bath & Beyond).
This was a cultural moment as much as a financial one. Robinhood, the brokerage that hosted most of the retail buying, halted purchases of GameStop and other meme stocks on January 28, 2021, citing capital requirements at its clearinghouse. Multiple Congressional hearings followed. The hedge fund Melvin Capital, one of the largest GameStop short-sellers, lost more than $6 billion in January 2021 and shut down completely by 2022.
The post-peak collapse was almost as fast as the rise. GameStop has spent the years since trading in a wide range, but never again at the January 2021 highs. AMC, BBBY (which went bankrupt in 2023), Koss, BlackBerry, and other meme names followed similar patterns: a furious rally to nonsense valuations, a brief consolidation, and then a slow decline back to fundamentals (or to zero, in the case of Bed Bath & Beyond).
An honest aside
The meme stock bubble was the first bubble I have lived through where the participants knew it was a bubble while they were participating in it. The catchphrase on r/wallstreetbets was "I like the stock," delivered with enough irony that you knew the speaker did not, in fact, like the stock; they just wanted to hold it long enough to make Wall Street angry. This is not a flattering chapter for finance, but it is also not a flattering chapter for finance in the other direction. $483
GME Peak
100%+
Short Interest at Peak
$6B+
Melvin Capital Loss
5 yrs
Still Below Peak
5. Nifty Fifty (1972-73)
5
Polaroid, Xerox, Avon, Disney, IBM, Coca-Cola
Peak Dec 1972 · Average P/E 42 vs S&P 19
-91%
Polaroid Drawdown
Pre-Internet Era The Nifty Fifty were a group of about fifty large-capitalization growth stocks that institutional investors bought as so-called "one-decision" stocks: you bought them and you never sold. Names included Polaroid, Xerox, Avon, McDonald's, Walt Disney, IBM, Coca-Cola, Johnson & Johnson, Procter & Gamble, and Philip Morris.
By December 1972, the average price-to-earnings ratio of the Nifty Fifty was about 42, more than double the S&P 500's P/E of around 19. The most extreme valuations were in the names that fit the "growth at any price" thesis best. Polaroid traded at 91 times earnings. McDonald's at 86. Walt Disney at 82. Avon at 65. The bubble thesis was that the high quality of these businesses justified paying any price.
What followed was the 1973-74 bear market, the worst since 1929-32. The S&P 500 fell about 48% from its January 1973 peak to October 1974. The Nifty Fifty stocks fell harder. Polaroid went down 91% from its peak. Avon fell 86%. Xerox fell 71%. Many of the most famous names spent the rest of the 1970s well below their 1972 highs.
What makes the Nifty Fifty interesting is the long-term postscript. Jeremy Siegel revisited the group in 1998 and found that, on a rebalanced basis, holding the Nifty Fifty stocks from December 1972 through 1998 produced returns roughly equal to the S&P 500. So the businesses were not bubble companies. The valuations were too high for the time, but the underlying earnings growth largely caught up over a 25-year horizon. That is a long time to be wrong about timing.
By December 1972, the average price-to-earnings ratio of the Nifty Fifty was about 42, more than double the S&P 500's P/E of around 19. The most extreme valuations were in the names that fit the "growth at any price" thesis best. Polaroid traded at 91 times earnings. McDonald's at 86. Walt Disney at 82. Avon at 65. The bubble thesis was that the high quality of these businesses justified paying any price.
What followed was the 1973-74 bear market, the worst since 1929-32. The S&P 500 fell about 48% from its January 1973 peak to October 1974. The Nifty Fifty stocks fell harder. Polaroid went down 91% from its peak. Avon fell 86%. Xerox fell 71%. Many of the most famous names spent the rest of the 1970s well below their 1972 highs.
What makes the Nifty Fifty interesting is the long-term postscript. Jeremy Siegel revisited the group in 1998 and found that, on a rebalanced basis, holding the Nifty Fifty stocks from December 1972 through 1998 produced returns roughly equal to the S&P 500. So the businesses were not bubble companies. The valuations were too high for the time, but the underlying earnings growth largely caught up over a 25-year horizon. That is a long time to be wrong about timing.
P/E 42
Avg Peak Multiple
P/E 91
Polaroid Peak
-48%
S&P 500 Drawdown
7.5 yrs
Index Recovery
4. Subprime / Financial Bubble (2007)
4
Mortgage-Backed Securities · Bank Stocks
Peak Oct 9 2007 · S&P 500 at 1565 · Trough March 2009
-57%
S&P 500 Drawdown
Modern Era The 2007 bubble was unusual because the underlying mania was not in the stock market itself but in the housing market and in the structured credit products tied to housing. The stock market peak in October 2007 was a derivative effect: bank stocks were priced as if mortgage-backed securities were money-good, and they were not.
The bubble had three intertwined components. First, US home prices rose more than 55% from 2000 to 2007, supported by lending standards that had been gradually relaxed over a decade (subprime mortgages, no-doc loans, interest-only ARMs). Second, those mortgages were packaged into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) and sold to institutional investors globally. Third, banks held large amounts of these structured products on their own balance sheets and used them as collateral for further leverage.
When subprime borrowers started defaulting in 2007, the structured products lost their value. Banks holding those assets took massive write-downs. Bear Stearns collapsed in March 2008. Lehman Brothers went bankrupt in September 2008. AIG, Fannie Mae, and Freddie Mac were nationalized. The S&P 500 fell 57% from its October 2007 peak to its March 2009 bottom. The Federal Reserve cut rates to zero, the Treasury launched TARP, and the global financial system spent the next several years in repair mode.
The 2007 bubble matters here because it is the only bubble on this list where the underlying technology was not new. Housing was not a new asset class. Mortgages were not a new product. The "innovation" was financial engineering: slicing and re-slicing mortgage cash flows to create instruments that were rated AAA but turned out to be junk. That is a different kind of bubble than the technology-driven ones above and below this entry, and arguably scarier, because financial engineering can manufacture bubbles in any underlying asset.
The bubble had three intertwined components. First, US home prices rose more than 55% from 2000 to 2007, supported by lending standards that had been gradually relaxed over a decade (subprime mortgages, no-doc loans, interest-only ARMs). Second, those mortgages were packaged into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) and sold to institutional investors globally. Third, banks held large amounts of these structured products on their own balance sheets and used them as collateral for further leverage.
When subprime borrowers started defaulting in 2007, the structured products lost their value. Banks holding those assets took massive write-downs. Bear Stearns collapsed in March 2008. Lehman Brothers went bankrupt in September 2008. AIG, Fannie Mae, and Freddie Mac were nationalized. The S&P 500 fell 57% from its October 2007 peak to its March 2009 bottom. The Federal Reserve cut rates to zero, the Treasury launched TARP, and the global financial system spent the next several years in repair mode.
The 2007 bubble matters here because it is the only bubble on this list where the underlying technology was not new. Housing was not a new asset class. Mortgages were not a new product. The "innovation" was financial engineering: slicing and re-slicing mortgage cash flows to create instruments that were rated AAA but turned out to be junk. That is a different kind of bubble than the technology-driven ones above and below this entry, and arguably scarier, because financial engineering can manufacture bubbles in any underlying asset.
1565
S&P Peak
676
S&P Trough (Mar 2009)
-57%
S&P Drawdown
5.5 yrs
To Recovery
3. AI / Magnificent 7 Bubble (2023-Present)
3
Nvidia, Microsoft, Google, Meta, Amazon, Apple, Tesla
Currently inflating · CAPE ~41 · Mag 7 ~34% of S&P 500
$5T
Nvidia Peak Mkt Cap
Currently Inflating This is the bubble we are currently in. I am writing this in May 2026, with the Magnificent 7 (Nvidia, Microsoft, Alphabet, Amazon, Meta, Apple, Tesla) accounting for roughly 34% of the S&P 500 and the Shiller CAPE ratio above 40 for only the second time since 1881. The bull case is well-known: AI is a foundational technology, the Mag 7 are profitable (unlike most dot-com names), and Nvidia's gross margins of 71% are real, current, and growing.
The bear case is also well-known. Hyperscaler capital expenditure on AI infrastructure is approaching $700 billion per year in 2026, with much of it funded by debt and circular financing arrangements. OpenAI committed to spending $1.4 trillion over 8 years on data centers despite a $25 billion annualized revenue run rate. Microsoft, Google, Amazon, and Meta plan to raise around $86 billion in bonds in 2026 alone to fund AI capex. Nvidia owns equity in CoreWeave, which buys GPUs from Nvidia, which is also financed by debt that is collateralized in part by the value of those GPUs. Several of these capital flows are circular in a way that becomes problematic if revenue growth slows.
The DeepSeek moment in January 2025, when a low-cost Chinese AI model triggered a 17% one-day decline in Nvidia stock, was the first warning shot. Subsequent NBER and McKinsey studies have shown that 90%+ of firms report no measurable productivity gains from AI deployments, despite executives projecting they will.
I am ranking this at #3 not because the drawdown has happened (it has not), but because the scale of the wealth at stake is the largest of any bubble in US history. Nvidia alone has a market capitalization larger than the entire German stock market. The Mag 7 collectively are worth more than the entire stock market of every country except the US and China. If AI revenue growth fails to keep pace with the priced-in expectations, the resulting drawdown would dwarf 2008 in absolute dollar terms. That is not a prediction. It is just arithmetic.
The bear case is also well-known. Hyperscaler capital expenditure on AI infrastructure is approaching $700 billion per year in 2026, with much of it funded by debt and circular financing arrangements. OpenAI committed to spending $1.4 trillion over 8 years on data centers despite a $25 billion annualized revenue run rate. Microsoft, Google, Amazon, and Meta plan to raise around $86 billion in bonds in 2026 alone to fund AI capex. Nvidia owns equity in CoreWeave, which buys GPUs from Nvidia, which is also financed by debt that is collateralized in part by the value of those GPUs. Several of these capital flows are circular in a way that becomes problematic if revenue growth slows.
The DeepSeek moment in January 2025, when a low-cost Chinese AI model triggered a 17% one-day decline in Nvidia stock, was the first warning shot. Subsequent NBER and McKinsey studies have shown that 90%+ of firms report no measurable productivity gains from AI deployments, despite executives projecting they will.
I am ranking this at #3 not because the drawdown has happened (it has not), but because the scale of the wealth at stake is the largest of any bubble in US history. Nvidia alone has a market capitalization larger than the entire German stock market. The Mag 7 collectively are worth more than the entire stock market of every country except the US and China. If AI revenue growth fails to keep pace with the priced-in expectations, the resulting drawdown would dwarf 2008 in absolute dollar terms. That is not a prediction. It is just arithmetic.
A view from May 2026
The S&P 500's forward P/E in May 2026 is around 21, well above the 10-year average of around 19 and at multi-year highs. The Shiller CAPE is above 40 for the first time since 2000. The top 10 stocks now account for around 40% of the index, which is the most concentrated US market in modern history. None of these data points individually mean a bubble has to pop, but collectively they indicate the market is pricing in an unusually optimistic outcome from AI. If that outcome arrives, the current valuations will look fair in retrospect. If it does not, this paragraph will read very differently in a few years. $5T
Nvidia Peak
~34%
Mag 7 % of S&P 500
~41
Shiller CAPE
$700B
2026 AI Capex
2. Dot-com Bubble (1995-2000)
2
Pets.com, Webvan, Cisco, Amazon, AOL
NASDAQ peaked March 10, 2000 at 5048
-78%
NASDAQ Drawdown
Modern Era The dot-com bubble is the closest historical comparison to the current AI bubble, and for that reason it is worth studying carefully. The NASDAQ Composite rose from around 750 in early 1995 to 5048 on March 10, 2000, a roughly 7x gain in five years. The bubble was fueled by the genuinely transformative arrival of the World Wide Web combined with a willingness to value internet companies on metrics like "eyeballs" or "page views" rather than earnings.
The peak valuations were extraordinary. Cisco Systems traded at over 200 times earnings in March 2000, briefly making it the most valuable company in the world at a market cap of around $555 billion. Microsoft was valued at over 70 times earnings. JDSU traded at over 600 times earnings. Pets.com famously went public, ran a Super Bowl ad, and was bankrupt within a year. Webvan raised $375 million in its IPO and burned through it all on warehouses before closing in 2001. The standard joke was that the surest way to add a billion dollars to your market cap was to add ".com" to your company name.
What followed was a 78% peak-to-trough decline in the NASDAQ Composite over 31 months, ending in October 2002. The total wealth destruction was around $6.6 trillion. Cisco fell from $80 to $8. Yahoo fell from a split-adjusted peak of $118 to a low of $8. Amazon, which everyone now thinks of as a dot-com survivor, fell from $107 to $5.97 (a 94% drawdown), and the survival was not obvious in real time. The NASDAQ did not regain its March 2000 peak until 2015, fifteen years later.
The dot-com bubble's key lesson, often repeated, is that the technology was real but the valuations priced in too much of the future too early. The internet did transform the economy. Many of the dot-com survivors went on to be among the most valuable companies in human history. But getting in at the 2000 peak and holding meant 15 years of returns that did not come. The "buy-and-hold always works" thesis depends entirely on what you bought and at what price.
The peak valuations were extraordinary. Cisco Systems traded at over 200 times earnings in March 2000, briefly making it the most valuable company in the world at a market cap of around $555 billion. Microsoft was valued at over 70 times earnings. JDSU traded at over 600 times earnings. Pets.com famously went public, ran a Super Bowl ad, and was bankrupt within a year. Webvan raised $375 million in its IPO and burned through it all on warehouses before closing in 2001. The standard joke was that the surest way to add a billion dollars to your market cap was to add ".com" to your company name.
What followed was a 78% peak-to-trough decline in the NASDAQ Composite over 31 months, ending in October 2002. The total wealth destruction was around $6.6 trillion. Cisco fell from $80 to $8. Yahoo fell from a split-adjusted peak of $118 to a low of $8. Amazon, which everyone now thinks of as a dot-com survivor, fell from $107 to $5.97 (a 94% drawdown), and the survival was not obvious in real time. The NASDAQ did not regain its March 2000 peak until 2015, fifteen years later.
The dot-com bubble's key lesson, often repeated, is that the technology was real but the valuations priced in too much of the future too early. The internet did transform the economy. Many of the dot-com survivors went on to be among the most valuable companies in human history. But getting in at the 2000 peak and holding meant 15 years of returns that did not come. The "buy-and-hold always works" thesis depends entirely on what you bought and at what price.
5048
NASDAQ Peak
200x
Cisco P/E at Peak
$6.6T
Wealth Destruction
15 yrs
NASDAQ Recovery
1. The 1929 Stock Market Bubble
1
Roaring Twenties · Margin Trading · Radio & Auto Stocks
Dow peaked Sept 3, 1929 at 381 · Bottomed July 1932 at 41
-89%
Dow Drawdown
Pre-Internet Era The 1929 stock market bubble is the most consequential financial event in US history. It triggered the Great Depression. It changed the way the federal government regulates securities markets (creating the SEC, the FDIC, Glass-Steagall, and the Securities Act of 1933). It changed monetary policy thinking for a generation. And it produced the largest peak-to-trough drawdown of any major US stock index ever: 89%.
The setup was the Roaring Twenties. The Dow Jones Industrial Average rose from around 63 in August 1921 to 381 on September 3, 1929, a roughly six-fold gain in eight years. The drivers were genuine: new technologies (radio, automobiles, aviation, electric grids) were transforming American life. But the speculative leverage on top was extreme. By 1929, retail investors could buy stocks on margin with as little as 10% down. Banks were investing depositor funds in stocks without disclosure. Investment trusts (the closed-end funds of the era) leveraged on top of leverage to buy stocks of other investment trusts that themselves leveraged into stocks. The pyramid was enormous.
The crash began on October 24, 1929 (Black Thursday) and accelerated on October 28-29 (Black Monday and Black Tuesday). The Dow fell 12% on Monday and almost 12% on Tuesday. By mid-November the index had lost nearly half its value. But the worst was still ahead. The market continued to decline for nearly three more years, bottoming on July 8, 1932 at 41.22. From peak to trough, the Dow lost 89% of its value. Banks failed by the thousands. Unemployment rose to 25%. The United States and most of the world entered an economic depression that lasted until World War II.
The recovery was correspondingly slow. The Dow did not regain its September 1929 peak until November 1954, twenty-five years later. An investor who put $10,000 into the market at the 1929 peak and held would not have broken even, in nominal terms, until Eisenhower was president. Adjusted for inflation, the wait was even longer.
The setup was the Roaring Twenties. The Dow Jones Industrial Average rose from around 63 in August 1921 to 381 on September 3, 1929, a roughly six-fold gain in eight years. The drivers were genuine: new technologies (radio, automobiles, aviation, electric grids) were transforming American life. But the speculative leverage on top was extreme. By 1929, retail investors could buy stocks on margin with as little as 10% down. Banks were investing depositor funds in stocks without disclosure. Investment trusts (the closed-end funds of the era) leveraged on top of leverage to buy stocks of other investment trusts that themselves leveraged into stocks. The pyramid was enormous.
The crash began on October 24, 1929 (Black Thursday) and accelerated on October 28-29 (Black Monday and Black Tuesday). The Dow fell 12% on Monday and almost 12% on Tuesday. By mid-November the index had lost nearly half its value. But the worst was still ahead. The market continued to decline for nearly three more years, bottoming on July 8, 1932 at 41.22. From peak to trough, the Dow lost 89% of its value. Banks failed by the thousands. Unemployment rose to 25%. The United States and most of the world entered an economic depression that lasted until World War II.
The recovery was correspondingly slow. The Dow did not regain its September 1929 peak until November 1954, twenty-five years later. An investor who put $10,000 into the market at the 1929 peak and held would not have broken even, in nominal terms, until Eisenhower was president. Adjusted for inflation, the wait was even longer.
Why this is #1
The 1929 bubble is on top of this list because it produced not just the biggest drawdown and the longest recovery, but also the most far-reaching second-order consequences. The Great Depression killed thousands of banks, eliminated quarter of US GDP, and arguably enabled the rise of fascism in Europe by destabilizing the global economy. No subsequent stock market bubble has caused damage on that scale, and let us hope none ever does again. 381
Dow Peak (Sept 1929)
41
Dow Trough (July 1932)
-89%
Total Drawdown
25 yrs
To Recovery (1954)
How long it takes to recover
The drawdown is half the story. The other half is the recovery time. A 50% drawdown that lasts six months is annoying. A 50% drawdown that lasts six years can wipe out a retirement plan. The recovery times across the bubbles on this list range from less than two years (1987) to twenty-five years (1929) to literally never (cannabis stocks).Years to Recover Pre-Bubble Peak
Some bubbles recover in months. Some take a generation. Some never.
"Buy and hold" is the right strategy in expectation, but the path matters. Buying at the 1929 peak meant a 25-year hold to break even. Buying at the dot-com peak meant 15 years. The path through a bubble is often more painful than the percentage drawdown alone suggests.
Patterns worth noticing
A few things become clear when you look at all ten bubbles together. None of them are surprising on their own, but together they sketch a recognizable pattern.Every bubble starts with a real innovation
The 1920s had radio, autos, and electric grids, all transformative. The Nifty Fifty were genuinely high-quality companies. The dot-com bubble was built on the actual arrival of the World Wide Web. The 2007 bubble was on the back of mass home ownership becoming possible for more Americans through new lending products. The AI bubble has the actual capability of large language models. The bubble is never the technology itself; it is the assumption that the technology will pay off in a particular way and on a particular timeline.The valuations always look insane in retrospect
Cisco at 200 times earnings. Polaroid at 91. Pets.com at any positive number. Tilray at $300. The Mag 7 today at 28 times forward earnings (this one is actually mild by historical bubble standards, which is what bulls cite, and which is the strongest argument that we are not in a 1999-style bubble).The biggest fortunes are made by selling early, not by avoiding
Joseph Kennedy famously sold most of his stocks in summer 1929 because his shoeshine boy was giving him stock tips. Stanley Druckenmiller sold tech in early 2000 (then bought back in and lost most of his year). Michael Burry shorted housing in 2007 and made hundreds of millions. The pattern is not that the smart money avoided every bubble. It is that the smart money sold near the top, ate the embarrassment of watching the bubble keep going for a few months, and then was right.The Shiller CAPE ratio is the closest thing we have to a bubble thermometer
The cyclically-adjusted price-to-earnings ratio (CAPE) was developed by Robert Shiller in the 1980s and tracks the price of the S&P 500 divided by its trailing 10-year inflation-adjusted earnings. It is one of the few valuation metrics that has been measurable across all the bubbles on this list. Looking at it over 145 years, the only times CAPE has crossed 40 are in 1999-2000 (peaked around 44) and right now, in 2026 (just over 40). It crossed above 30 in 1929 (peaked at about 32). The reading does not predict crashes by itself, but it does indicate that current valuations are firmly in bubble-territory company.Shiller CAPE Ratio: 1881 to 2026
The cyclically-adjusted P/E ratio of the US stock market, with each major bubble peak labeled
Today's CAPE of about 41 is the second-highest reading in 145 years of US stock market data, exceeded only by the dot-com peak. That does not mean a crash is imminent. It does mean that buying broad US stocks at today's valuations gives you very little margin of safety if AI returns disappoint.
The other bubbles (honorable mentions)
Five bubbles that were close to the top 10 cut but did not make it, either because the wealth destruction was modest, the impact was limited to a sector, or the data is sparse:HM
1869 Black Friday Gold Corner · 1901 Northern Pacific Corner · 1907 Knickerbocker Crisis · 1925-26 Florida Real Estate · 2021 Crypto Bubble
All five are real bubbles worth knowing about, but they did not crack the top 10.
1869 Black Friday Gold Corner: Jay Gould and Jim Fisk attempted to corner the gold market. President Grant intervened. The gold price collapsed in a single day, taking the stock market down with it. More of a commodity manipulation than a stock bubble, but it dragged equities along.
1901 Northern Pacific Corner: James J. Hill and E.H. Harriman fought for control of the Northern Pacific Railway. NP shares were squeezed from around $170 to over $1,000 in days as both sides bought every available share. The first modern short squeeze. The settlement caused a brief market panic.
1907 Knickerbocker Crisis: A bank run on the Knickerbocker Trust Company spread to other banks and caused a 50% drop in the NYSE from its 1906 peak. J.P. Morgan personally arranged a private bailout. The crisis led directly to the creation of the Federal Reserve in 1913.
1925-26 Florida Real Estate Bubble: A speculative mania in Miami beachfront real estate. Lots that traded hands many times in a single day. The bubble popped in 1926 (a hurricane destroyed much of southeast Florida that September) and was an early warning sign that the broader Roaring Twenties speculation was unsustainable. Real estate bubble more than stock market bubble, but related.
2021 Crypto Bubble: Bitcoin from under $5,000 in March 2020 to $69,000 in November 2021. Coinbase went public at $76 in April 2021 and is currently trading well below that price (peak above $400). The total crypto market cap fell from over $3 trillion at peak to around $800 billion in late 2022. Excluded because the asset class itself is contested as "stocks" (although Coinbase the stock did follow the pattern).
1901 Northern Pacific Corner: James J. Hill and E.H. Harriman fought for control of the Northern Pacific Railway. NP shares were squeezed from around $170 to over $1,000 in days as both sides bought every available share. The first modern short squeeze. The settlement caused a brief market panic.
1907 Knickerbocker Crisis: A bank run on the Knickerbocker Trust Company spread to other banks and caused a 50% drop in the NYSE from its 1906 peak. J.P. Morgan personally arranged a private bailout. The crisis led directly to the creation of the Federal Reserve in 1913.
1925-26 Florida Real Estate Bubble: A speculative mania in Miami beachfront real estate. Lots that traded hands many times in a single day. The bubble popped in 1926 (a hurricane destroyed much of southeast Florida that September) and was an early warning sign that the broader Roaring Twenties speculation was unsustainable. Real estate bubble more than stock market bubble, but related.
2021 Crypto Bubble: Bitcoin from under $5,000 in March 2020 to $69,000 in November 2021. Coinbase went public at $76 in April 2021 and is currently trading well below that price (peak above $400). The total crypto market cap fell from over $3 trillion at peak to around $800 billion in late 2022. Excluded because the asset class itself is contested as "stocks" (although Coinbase the stock did follow the pattern).
The Bottom Line
What these ten bubbles have in common, and why it matters in 2026
If I had to summarize the lesson of all ten bubbles in one sentence: every bubble looks defensible at the peak using whatever valuation framework is in fashion at the time, and indefensible in retrospect using the framework that everyone was previously ignoring. The Nifty Fifty looked fine if you assumed perpetual high earnings growth. The dot-com bubble looked fine if you assumed eyeballs eventually become revenue. The 2007 bubble looked fine if you assumed home prices never decline nationally. The AI bubble looks fine if you assume hyperscaler capex translates to durable AI revenues that justify current valuations. The framework is always the question being begged.The most uncomfortable thing about being inside a bubble is that you cannot tell whether it is a bubble until later. There is no horn that sounds at the top. The peak is just another day. The shoeshine boys giving stock tips, the magazine covers proclaiming the death of value investing, the celebrity fund managers being interviewed on the morning shows: those are signals, but they are signals that something might be wrong, not certainty. The smart move is usually not to be all-in or all-out, but to be calibrated. Don't let any single position get to a size where a 75% drawdown ends your story. That advice does not change across bubbles. It is just easier to give than to follow.
The 1929 bubble is #1 on this list because of the depth of its drawdown and the length of its recovery. The dot-com bubble is #2 because of its scale of wealth destruction. The AI bubble is #3 because the dollars at stake make it the largest in absolute terms even though no drawdown has happened yet. None of those rankings will look quite right in five years. The list will be reordered. New bubbles will be added. The lessons will be the same.
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