The Shiller P/E ratio has reached 42, its highest level since the dot-com boom. This time, AI stocks have driven that metric to its highs. This has stoked fears that the cycle will repeat, leading to an AI bust.
Like the internet, AI is likely here to stay. Still, internet stocks endured the dot-com bust despite the industry's long-term successes. Thus, expecting the same thing to happen to AI stocks is a real concern.
However, such events are nearly impossible to time, and those who sell out of the market to avoid a market downturn could also miss out on long-term gains.
Thus, the compromise may be to pivot toward tech stocks likely to survive such an event. Knowing that, these three should hold up well even if the dreaded AI bust occurs.
Image source: Getty Images.
Alphabet
Google parent Alphabet (GOOGL -0.13%) (GOOG -0.12%) missed the dot-com bust by waiting until 2004 to go public. However, the company has used AI since 2001, and thanks to its successes with Google Gemini, it has successfully responded to the competitive threat from ChatGPT.
Admittedly, this has come at a cost. It has raised its capital expenditures (capex) to the $195 billion to $205 billion range for 2026, up from $91 billion in 2025.
It has increased its liquidity to over $242 billion to get ahead of this spending, and long-term debt more than doubled to over $98 billion over the previous six months. Also, free cash flow, which excludes capex, is now $53 billion for the trailing 12 months, down from $67 billion one year ago.
NASDAQ: GOOGL
Key Data Points
Nonetheless, investors may notice that Alphabet may have become Berkshire Hathaway's next Apple. That interest may partially stem from the fact that its net cash from operating activities was $186 billion for the same period. Thus, even if its capex spending does not bear fruit, Alphabet should be able to service its loans.
Moreover, the stock trades at a P/E ratio of just 17. That should limit its downside in an AI bust, keeping investors safe and preparing them for a likely recovery in the AI sector.
Amazon
Amazon (AMZN -0.94%) was a dot-com-era darling that suffered a sell-off exceeding 90% after the boom ended. However, it emerged as an internet leader, using that strength to pivot into the cloud and eventually AI.
Today, Amazon has amassed around $123 billion in liquidity. It was also once a strong free cash flow generator, with $38 billion in annual free cash flow as recently as 2024.
Nonetheless, Amazon pledged $220 billion in capex for 2025, up from $132 billion in 2025. With that, free cash flow in Q2 has fallen to -$7.6 billion over the trailing 12 months, and long-term debt is now almost $129 billion.
NASDAQ: AMZN
Key Data Points
Fortunately, in Q2, it generated $161 billion in net cash from operating activities over the previous 12 months. That gives it latitude to pull back on capex and reduce its debt if its AI spending does not yield returns.
Finally, it sells at a 22 P/E ratio, a low level that would have seemed unthinkable a few years ago. That should limit its downside and set it up for a recovery should an AI bust occur.
Nvidia
Nvidia (NVDA -0.06%) attained the world's largest market value by pioneering the AI chip industry. This product has fueled the AI boom, and its dominance continues despite the emergence of competitors.
If the AI boom ends, Nvidia's problem will not be capex, which totaled just $6.6 billion over the previous 12 months. Instead, the concern with Nvidia is the charges of circular financing. Nvidia had invested in enterprises that are also customers, leaving investors wondering whether all of Nvidia's growth was real.
To ease that concern, Nvidia partnered with several prominent asset management firms to provide $500 billion in financing. While that could take some of the heat off Nvidia, it highlights the industry's dependence on outside financing.
NASDAQ: NVDA
Key Data Points
Still, an AI bust would only hurt Nvidia if AI disappeared entirely, which is unlikely. Currently, Nvidia holds about $80 billion in liquidity and around $8.5 billion in total debt, which speaks to its stability. Moreover, it generated $119 billion in free cash flow over the last 12 months.
Considering its 34 P/E ratio, any downside is likely to be limited and temporary.
