Investors riding the AI-fueled stock market rally may want to reconsider some of their most expensive positions as valuations reach historic extremes.
The benchmark S&P 500 currently trades at a Shiller Cyclically Adjusted Price-to-Earnings ratio of 41.9, making it the second-most expensive market in history, trailing only the dot-com bubble of 2000.
The index has more than doubled from its bear-market low in 2022, driven largely by enthusiasm surrounding the ongoing artificial intelligence boom.
Geopolitical tensions in the Middle East, elevated inflation, rising government bond yields, and the upcoming midterm congressional elections in November are all adding to an uncertain investment backdrop.
Stocks carrying the highest valuations tend to suffer the sharpest declines during broad market sell-offs, as investors use downturns as opportunities to lock in gains and reduce portfolio risk.
Advanced Micro Devices (NASDAQ: AMD) is one chipmaker that analysts are flagging as particularly vulnerable, given its price-to-earnings ratio of 87.8 based on adjusted trailing-12-month earnings of $5.76 per share.
That P/E ratio is more than twice that of Nvidia, which currently trades at a P/E of 34.4, making AMD appear richly priced even relative to its primary competitor in the AI GPU market.
AMD’s data center revenue more than doubled year over year to a record $6.7 billion in the second quarter of 2026, accounting for more than half of the company’s total revenue of $11.5 billion.
CEO Lisa Su has projected the AI chip market will reach $1.4 trillion by 2030, and major customers including OpenAI, Microsoft, Meta Platforms, and Anthropic plan to deploy AMD’s upcoming MI450 GPUs in their data centers.
The MI450, when paired with the Helios data center rack, is expected to deliver 15% more processing power with 30% better cost efficiency than competing solutions currently on the market.
CrowdStrike (NASDAQ: CRWD) is the second high-valuation stock drawing scrutiny, with its price-to-sales ratio sitting above 42, a significant premium to rival Palo Alto Networks and far above the Nasdaq-100’s P/S ratio of just 6.3.
CrowdStrike’s Falcon platform offers 33 different security modules, protecting cloud networks, employee identities, and endpoints in what the company positions as an all-in-one enterprise cybersecurity solution.
The company reported $5.5 billion in annual recurring revenue as of its fiscal 2027 first quarter ending April 30, representing a 24% increase from the prior-year period.
Flex subscription ARR doubled to $1.9 billion, while the company’s AI Detection and Response module experienced a 250% increase in ARR during the same quarter.
CrowdStrike stock has already suffered three peak-to-trough declines of at least 25% since 2024 alone, suggesting investors should prepare for continued volatility if the broader market deteriorates further.
