Stocks have soared in value rapidly, and investors are understandably thrilled about the prospect of more gains. It should come as no surprise that bubbles are a hot topic. However, a lot of the typical things that go with a bubble are not there.

The argument that stock prices are erratic is not difficult to make. Thursday saw a new record for the Nasdaq, which has increased by 54% since the beginning of the year. The S&P 500 has also increased by 32%. Nvidia’s gains are so large that its worth has increased by $1.5 trillion, rather than the difficult-to-grasp 441%. Last month, its worth increased by $276 billion in only one day—almost the same amount as Chevron, the index’s 26th largest company. Such conduct is not typical.

However, is it a sphere? I think a speculative craze is necessary for a market bubble to exist, however there is no universally accepted definition of the term. It happens when a large number of purchasers disregard the reasonableness of the price or simply buy something because they believe someone less intelligent would buy it from them for a higher price, rather than considering the potential profit from the purchase.

Somehow, this is not there. Of course, there are a few telltale symptoms of crowd psychology: In February, investors were informed that Nvidia, maker of the processors needed for AI processing, owned a small percentage of SoundHound AI, which caused the price to more than treble. As is typical during bubbles, tiny stocks are soaring, with the Russell Microcap index posting one of its best performances ever after four months of nearly 30% gains.

This, however, is insignificant when contrasted with the post-pandemic lunacy surrounding meme stocks, useless tech, SPACs, and cryptocurrency, as well as the late 1990s dot-com boom. According to surveys, investors are feeling optimistic, although not quite as euphoric as during previous bubbles. For instance, in their weekly survey, 47% of investors said they were bullish, which is lower than the 75% who said the same in 2000 or the 60% who said the same at the beginning of 2018.

Companies aren’t springing up just to take advantage of a deluge of speculative capital since there isn’t a stampede of capital into the market or a surge in investment leverage. Although stock prices may be too high and investors may be viewing the market through rose-colored glasses, this does not constitute a bubble. Until now.

Have a look at the values and price gains simultaneously.

In fact, stock prices have risen significantly. In most cases, nevertheless, this follows a significant decrease. The Nasdaq just surpassed its previous high, which it reached at the end of 2021, before plunging 36%. This is the key to understanding why the index is setting new highs. After previous market crashes in the 1970s, 1980s, 1990, 2001, and the 2008–2009 financial crisis, a similar pattern emerged, although this time with even bigger profits. This type of recovery was obviously different from the bubble in 1999, which caused the Nasdaq to rise 154% in the same amount of time that it took to rise 54% this time, or from 2021, when the rise was 100%, with both of those years experiencing significantly smaller drops prior.

Microcap stocks are no different. Their near-halving from the early 2021 bubble has not been recovered, and they remain below their February 2018 levels.

There isn’t a lot of speculation buying indicated by valuations either. During the late 90s dot-com bubble, when purchasers didn’t think valuations mattered anymore, the Nasdaq peaked at more than 100 times expected earnings for 12 months ahead.

Compared to its trading price of 35 times expected earnings in late 2020, the Nasdaq is currently trading at 27 times. Neither has Nvidia’s meteoric climb been about larger values; the company’s earnings and projected earnings have been increasing at a faster rate than the share price, resulting in a lower valuation than Nvidia had before the AI boom began with the release of ChatGPT.

Unlike now, when the market in Japan was trading at 50 times forecast earnings in 1989, the big bubbles of the past were driven by enormous speculation that caused valuations to skyrocket. Excessive optimism devolved into the most fundamental kind of guesswork at its most extreme. In this elaborate Ponzi scheme, stocks were merely a medium of exchange for the purchase and sale of new ownership stakes.

To meet the demand of investors who were eager to invest in the trendy narrative, stock promoters likewise hurried to establish new businesses. The 1720 South Sea bubble may have been the most dramatic of the great bubbles, but with soaring stock prices came an IPO boom in every major bubble. Historian Edward Chancellor writes in “Devil Take the Hindmost” that new businesses were trying to raise money for projects that enticed gullible buyers. One of these projects was to transport live fish on ships filled with water, but the fish died. Another was a flintlock machine gun that fired square bullets, but it was too unreliable. In the end, the project failed.

A more contemporary analogy might be the SPAC boom of 2020–21. Yet, the initial public offering market is having a rough day today.

The publication of ChatGPT last year caused a mini-bubble in artificial intelligence. But that exemplifies the contrast between the slightly more realistic scenario today and the hope-based speculation that is prevalent with the takeoff of new technologies, such as canals, trains, bicycles, the internet, solar power, and electric cars. When the market saw AI-related stocks climb, they quickly fell if the companies couldn’t prove a profit to back up their pricing. The resurgence of some of those equities has occurred only in the previous two weeks.

The long-term possibilities of AI may inspire investors to be overly hopeful. They could be completely mistaken regarding the possible earnings as well. Given Nvidia’s massive profit margins, this is less likely to be bubble behavior and more the result of the company’s failure to account for new competitors lured in by such margins. So far, anyhow.