Australia's $3.7 trillion super system is deeply invested in global tech giants riding the artificial intelligence (AI) wave. But new research suggests this boom may be more bubble than breakthrough – and Australians could be left exposed.
The rise of AI has driven a surge in global share markets, with the so-called 'magnificent seven' tech giants – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – leading the charge.
At first glance, this looks like a triumph of innovation. But our research, published in the Journal of Time Series Analysis, shows this boom has all the signs of a speculative bubble – a warning Australians should not ignore.
What's a stock market bubble?
A bubble happens when stock prices soar well beyond a company's underlying value, fuelled by hype and investor psychology rather than fundamentals.
History shows the risks. The dotcom crash in the early 2000s wiped out about US$5 trillion in market value and the fallout rattled economies around the world. When bubbles burst, they don't just hurt investors – they can slow economic growth and shake confidence.
Why does this matter for Australians?
Even if you've never bought shares in Microsoft or Nvidia, your superannuation fund almost certainly has.
With trillions in retirement savings invested globally, Australian super funds are exposed to the ups and downs of these tech giants. If the AI bubble bursts, the impact could be felt in your future retirement balance.
What our research found
We analysed the Nasdaq and the 'magnificent seven' between 2010 and 2025, using advanced statistical methods to separate genuine growth from speculative surges. The findings were striking:
- We observed 'bubble behaviour' – prices increasing rapidly beyond the asset's value due to investor optimism rather than economic justification – in six of the seven companies, with Apple the only exception.
- Nvidia's share price jumped more than 570 per cent in just 18 months, signalling a rise that can lead to 'mildly explosive' behaviour.
- Speculation has persisted, with investor exuberance about AI stocks roaring back even after the 2021–22 downturn.
These patterns echo earlier market manias, from the dotcom boom to the housing bubble before the global financial crisis (GFC).
Beyond super: risks for Australia's economy
Beyond its impact on superannuation funds, the bursting of the Nasdaq bubble could ripple through to Australia by eroding investor confidence, straining global liquidity and reducing capital flows. Like the subprime mortgage crisis that contributed to the GFC, such shocks can heighten banking risks, dampen consumer spending and slow economic growth in Australia and globally.
The bottom line
The AI revolution is real and will shape our future. But history shows markets can get carried away. For Australians, that means remembering that when Wall Street sneezes, our superannuation may catch a cold.
Dr Shuping Shi (pictured above) is a Professor in the Department of Economics at Macquarie Business School.
