US tech bubble: what the headlines really mean and how we stay protected

US tech stocks have powered the investment markets for many years, but their soaring valuations raise an important question: what happens if the bubble bursts? It’s a valid question. But it’s also important to cut through the noise and remember why a well-diversified investment strategy can provide peace of mind despite the dramatic headlines.

But before we look at that in more detail, let’s see what’s causing the recent media attention.

A handful of US tech stocks – companies like Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Tesla and Meta – have soared in recent years, dominating market returns. As of late 2025, this ‘Magnificent Seven’ represents roughly one-third of the US stock market’s value, while contributing over 50% of the market’s gains in the past five years. Little wonder investors worry that such a rally could spell trouble if it reverses.

Some have even likened this to the dotcom bubble of 2000. However, a closer look shows some key differences. Yes, valuations are elevated, but still far below what we saw at the 2000 peak. And importantly, today’s tech leaders are hugely profitable whereas returns in the dotcom bubble were based on speculation. While current valuations aren’t cheap, they stand on far firmer foundations than in 2000.

Our Investment Approach: Four Pillars for Opportunity and Risk Control

While talk of a tech bubble continues to grab headlines, we can be safe in the knowledge that our portfolios are well-diversified to ensure that we are not reliant on any one particular asset class. Aside from equities (for example, US tech stocks) our multi-asset portfolios spread their risk profile by adding in bonds, real assets, alternative investments and cash. This means any downturn in tech stocks would be counterbalanced by returns from other parts of the strategy.

On top of that, our portfolios are managed with a disciplined four-pillar investment process to navigate environments like this – our four pillars are:

1. Valuations
2. Economic Fundamentals
3. Market Sentiment
4. External Market Influences

Let’s look closer at how each pillar addresses the tech bubble question:

1.Valuations

We scrutinise valuations across all holdings and asset classes. US tech stocks are expensive right now, so we’re being cautious. Instead of copying index weightings – which would put too much money into these big companies – we adjust and cut back when prices go beyond what we think is reasonable.

We still maintain exposure to quality tech leaders – because completely avoiding them could mean missing out on significant growth – but we do so in moderation. At the same time, we continuously seek value elsewhere, in regions or sectors that trade at more attractive valuations (Japan is a good example of this).

2.Economic Fundamentals

We evaluate each region to understand levels of economic activity, unemployment, inflation, monetary policy, fiscal policy, financial conditions, corporate conditions, consumer confidence and demand and real estate. By doing so we get an idea of headwinds and the tailwinds that each asset class and sector faces.

In the case of US tech stocks, fundamentals remain robust: these firms are generating record revenues, healthy profit margins, and abundant free cash flow. They are leaders in their fields with durable business models. Also, high-growth tech stocks tend to respond poorly to interest rate hikes. Now, with inflation stabilising, central banks are reducing rates – a positive sign for US tech stocks. This is why we still feel they have a seat at the table.

Our strategy keeps us invested in companies with solid earnings power, but with significantly less exposure and concentration risk than the market average. This means your multi-asset portfolio holds a broad mix of equities – including tech innovators and quality companies in sectors like healthcare, finance, or consumer goods – to capture diverse drivers of return.

3.Market Sentiment

We carefully gauge investor sentiment to avoid getting swept up in euphoria or panic. While positive sentiment can sustain momentum, over-exuberance can also lead to volatility if reality disappoints.

For instance, as enthusiasm drove tech valuations higher this year, we resisted any urge to overweight the hottest stocks. Instead, we took profits and bolstered positions in unloved, undervalued areas (where sentiment was cooler). This discipline ensures that if momentum abruptly reverses (say, due to disappointment in earnings or a regulatory shock in tech) your portfolio is not overweighted. Essentially, we’re happy to participate in popular trades, but we rebalance regularly to prevent ‘sentiment risk’ from undermining long-term returns.

4.External Market Influences

This includes geopolitics and other broader issues, such as levels of regulation, or barriers to business.  We constantly monitor the broader political and policy environment which can heavily influence market leadership. For instance, geopolitics recently led Germany to shift its once highly conservative stance on borrowing. This created significant opportunity for growth within Europe, which we took advantage of.

Capture the Upside, Limit the Downside 

In summary, US tech stocks, while expensive, are supported by strong business performance in a way that’s very unlike the early-2000s bubble. We capture their upside by owning carefully sized positions.

At the same time, by diversifying across sectors and asset classes, and tactically adjusting based on our four pillars, we limit the impact of any single segment on your overall wealth. This balanced approach, grounded in rigorous analysis and a long-term perspective, is designed to give you confidence that your portfolio can weather market storms and continue to work towards your financial goals, no matter what hype or fear dominates headlines in the short run.