The bull market that began in October 2022 has been a sight to behold. Ever since the inflation tantrum in 2021-22, stocks have been ripping higher amid the artificial intelligence (AI) revolution and falling inflation. The S&P 500 is up 88.5% since the beginning of 2023, delivering remarkable returns in just over three years.
When will this current bull market in stocks end? While predicting the exact timing of a bear market and a sustained period of falling stocks is futile, the characteristics of this bull market offer some clues about when the next shoe might drop.
Here's what could happen that would likely lead to the U.S. bull market ending and stocks tipping over into bear market territory, and what it could mean for your portfolio this decade.
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The current market is tied to AI and GDP growth
Anyone interested in investing is aware of the rapid build-out of AI data centers, spending on computer chips, and the massive amounts of capital being raised by AI labs such as Anthropic.
The Federal Reserve estimates that the data center buildout is significantly affecting U.S. gross domestic product (GDP) growth. GDP measured 3.8% in the second quarter, 4.4% in the third, and 1.4% in the fourth quarter of 2025. We can also quantify the massive investments by looking at the capital expenditure plans of the large technology providers. Combined, these companies have announced plans to put over $600 billion into cloud infrastructure -- mostly to serve their AI needs -- this calendar year.
This affects economic activity in many ways, including the growing demand for raw materials, computer chips, labor, and electricity to run these data centers. All this is currently boosting the country's GDP growth and raising stock prices to record highs. If you look at the list of the largest stocks in the world by market cap (Nvidia, for example), almost all of them are seeing a boost from spending on AI data centers.
Will the bull market in equities end?
With GDP growth and the momentum in stocks like Nvidia all stemming from the AI revolution, it's easy to see what will end this bull market: An inversion of the situation. If spending on AI data centers declines, it will affect GDP growth, earnings growth for the largest stocks in the world, and labor activity.
It is reminiscent of the initial buildout of internet infrastructure in 1999. Companies like Cisco Systems raced ahead of the insatiable demand for internet usage, which they correctly predicted would materialize as virtually everyone in the world got online. However, they built out the infrastructure 15 years ahead of schedule, and when investors realized this, they sent internet stocks crashing until earnings eventually caught up with the spending.
The same could happen to this AI bull market. A peak in AI spending would lead to falling earnings, slowing GDP growth, and likely a bear market in U.S. equities. Long-term investors need to keep this in mind as they choose stocks to buy and whether or not to sell. Bear markets are inevitable. However, earnings for good companies eventually catch up to the spending going on. When it does, the market will recover. Long-term investors don't panic; they take advantage of others' panic to buy stock in great companies during the inevitable dips.
