Everyone on Wall Street seems to have an opinion on whether artificial intelligence is a bubble. Steve Chiavarone’s opinion is that the question is early.
Chiavarone, Chief Investment Officer for Global Equities at Federated Hermes, said on October 21, 2026, that the current AI investment boom still has years to run before bubble risks become a serious concern.
The case for patience
His argument rests on where the money is actually going. The spending he points to covers data centers, semiconductors and power generation.
Chiavarone said this infrastructure buildout is encouraging rational capital allocation.
He noted that markets are currently being discerning, steering financing toward stronger companies.
He contrasted that with how bubbles have historically behaved. In those episodes, financing tended to be indiscriminate, with cheap money available to nearly everyone regardless of quality.
Chiavarone said he sees no signs of systemic bubble behavior, since capital keeps flowing to the firms that can best use it.
Earnings are doing the heavy lifting
Federated Hermes has also put numbers behind its optimism. The firm raised its S&P 500 earnings estimates, pointing to continued strong profit-margin expansion.
That expansion was projected at approximately 9% year-over-year in mid-2026, driven by AI-related capital spending.
Chiavarone has acknowledged that valuations are elevated. He just does not read them as a signal of an imminent bust.
Back in February 2026, he described the AI landscape as one shaped by optimism grounded in fundamentals rather than speculative fever.
“Rational optimism”
That was his phrase for the mood at the time, as opposed to irrational exuberance.
Some analysts have cautioned that corrections could arrive once infrastructure spending hits its peak. Chiavarone’s response is that those worries are premature, given current market conditions and the capital discipline he observes.
Who is making the call
Chiavarone stepped into the CIO role on September 1, 2026, succeeding Steve Auth. He brings more than two decades of investment experience to the seat.
Before the promotion, he served as Deputy CIO for Global Equities and led the firm’s Multi-Asset Group.
His core thesis is that the AI boom differs from earlier tech cycles because it rests on tangible infrastructure needs. That view feeds into the firm’s broader macro outlook, which favors large-cap growth stocks and AI infrastructure investments.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.