It’s fair to say that tech companies have enjoyed significant growth over the last few years. Fidelity reveals that:
- NVIDIA saw growth of 1,500% from 11 April 2020 and 11 April 2025
- Apple surged over 500% between 11 April 2015 and 11 April 2025
- Microsoft jumped over 800% from 11 April 2015 and 11 April 2025.
For a while, it might have seemed as though these companies – which are part of the “Magnificent Seven”, seven high-performing growth stocks – were unstoppable. That was until January 2025, when a new company arrived to shake things up.
You may have read several of our Window on the World updates where we’ve discussed DeepSeek, the Chinese Artificial Intelligence (AI) company that has caused significant market disruption.
Indeed, data from FTAdviser shows that DeepSeek spooked markets so much that it wiped roughly 17% – or £458.3 billion – from NVIDIA’s market value in a single trading day.
Due to these events, you might be wondering if the rise of these tech companies signals the formation of a market “bubble”.
Continue reading to discover what this means, and why it’s vital to stay calm and trust in your overarching financial plan, regardless of what happens.
“Bubbles” are significant rises in value, followed by a subsequent drop
A bubble is essentially an economic event marked by a rapid increase in asset prices, followed by a sharp decline known as the “burst”.
They typically form when enthusiasm or speculative behaviours drive prices far beyond their fundamental value.
Over time, prices often reach levels that the worth of the underlying assets can no longer justify, and when this sets in, there is usually a rush to sell. This, understandably, causes share prices to fall dramatically.
While the idea of a bubble might seem modern, history has shown they’ve been part of markets for centuries.
One of the more notorious examples is the Dutch “Tulip Mania” in the 17th century. After tulips became a luxurious and must-have product, Investopedia reveals that some of the best flowers were sold for what would be the equivalent of over $1 million in today’s money, all due to speculation.
Eventually, buyers could no longer afford these inflated prices, causing demand to collapse and the market to crash, leaving many investors bankrupt almost overnight.
More recently, you might remember the dot-com bubble of the late 1990s. During this period, internet-based tech stocks experienced significant growth, partly due to the promise of the new digital age.
According to data reported by Investopedia, the Nasdaq index rose five-fold between 1995 and 2000.
However, this didn’t last, and when the bubble burst between 2001 and 2002, the Nasdaq index fell by more than 76% by 4 October 2002.
If a bubble does burst, it’s vital to remain calm and trust in your plan
These historical crashes undoubtedly had a significant effect on markets at the time. Understandably, with these events in mind, you might be somewhat concerned about the substantial rises in modern tech stocks in recent years.
However, while these gains might remind you of past bubbles, it’s vital to remember that predicting when or if one will form is incredibly difficult.
Rather than trying to anticipate when the next market crash will occur, it might be more prudent to focus on building a robust portfolio designed to withstand market fluctuations.
As you may have read in our previous article on the importance of remaining calm during periods of volatility, diversification can be a valuable tool in achieving this goal.
Read more: Staying calm during periods of market volatility
By spreading your investments across various asset classes, sectors, and geographical areas, you can reduce the effect that a downturn in one area may have on your overall portfolio.
For instance, if tech stocks do experience a sudden decline, gains from healthcare companies could offset losses, helping you keep a cool head and avoid emotion-led decisions.
It’s essential to note that volatility is an inherent part of investing. While these short-term declines can be highly unsettling, adopting a long-term mindset could be another way to help you stay disciplined.
History has shown that markets often rebound after periods of difficulty. According to Fidelity, some of the FTSE 100’s worst single-day performances occurred in the early 2000s.
For instance, on 15 July 2002, following the bursting of the dot-com bubble, the FTSE 100 dropped by 5.44% in a single day.
Still, it delivered 45.5% growth over the next three years and 99.1% growth over the subsequent five years.
This shows how short-term downturns can be followed by periods of recovery, and staying invested allows you to benefit from the eventual rise.
A financial planner could help you stay the course during periods of significant downturn
Of course, it’s often easier said than done to remain calm and focused on your financial plan when a bubble bursts and markets decline.
This is where working with a financial planner could be of great help.
We can act as an impartial sounding board, helping you remain calm and confident in your long-term plan and avoid impulsive decisions that could harm your progress towards your long-term goals.
When dramatic headlines or short-term market movements tempt you to make changes to your portfolio, we can provide reassurance, reminding you of the carefully constructed plan you have in place.
We can also ensure that your portfolio is adequately diversified and aligned with your goals, time frame, and risk tolerance.
Through regular reviews, we can help you take a step back and evaluate whether any investment decisions – especially those caused by speculative or trend-chasing desires – fit in with your overall strategy.
This could ultimately reduce the risk of following the crowd into bubbles or overexposing your portfolio to a single sector.
Please use our search function to find your nearest Verso office, or for Verso Investment Management enquiries, please contact us at info@versoim.com or call 020 7380 3300.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.