Bitcoin has crashed. Could AI be next?
The father of an area of mathematics known as fractal geometry, Benoit Mandelbrot, in his fantastic book: The (wrong) behavior of marketsnoted that, unlike the smooth curves assumed in traditional financial models, market price movements are erratic and irregular, meaning that large price swings occur more often than expected, and that periods of high volatility can be followed by more high volatility. His work provides a more realistic framework for understanding and modeling risk, also noting that volatility in markets tends to cluster.
In my experience, I have seen that these volatility clusters often mark turning points in the markets. To be clear, not all periods of increased volatility are turning points, but almost all turning points are associated with increased volatility.
When this article was written (on November 21, 2025) we were experiencing some of that increasing volatility. As Mandelbrot noted, could this be followed by more countries in the near future?
Nvidia, the undisputed leader in artificial intelligence (AI), delivered another stellar earnings report on November 19, 2025, and after the bell it exceeded expectations with massive revenue growth, skyrocketing profits and indications that once again pointed to explosive demand ahead.
Initially the market reacted positively. Shares rose sharply at the open, rising more than 5 percent in the early hours as investors poured in. They were betting that this would mark another step up for technology and the broader market.
But then… something changed.
By the end, all these gains were gone. Nvidia turned red and ended more than three percent lower, causing the Nasdaq and the S&P 500 to fall along with it.
Risky assets took a hit across the board: Bitcoin, often seen as a proxy for investor appetite for high-growth businesses, fell nearly five percent in one day. Bitcoin is now down 30 percent from its high just six weeks ago. That’s a crash, by anyone’s standards.
Peak AI? For now.
The moves don’t appear to be just random volatility. Moments like these – when a company reports phenomenal numbers that exceed expectations and boost its prospects, but the stock (and the sector) still sells off – are warning signs that market veterans pay attention to.
I’ve long talked about the caution investors should exercise regarding AI-related stocks. When the boom arrived, I reminded our investors Technology that changes the course of history has historically been better for consumers than for investors. That was true of the 1999/2000 Internet boom – we all benefited enormously from the advent of the Internet, but Internet stock investors lost billions in 1999 and early 2000.
Many pointed to the combination of Nvidia’s market performance and poor stock price reaction as a potential turning point.
When the ‘perfect’ results of the sector’s star name no longer inspire sustainable purchases, but instead a ‘sell the fact’ response, it is often a sign that sentiment is near or at a peak. For now.
As we have noted in recent weeks, there is increasing risk that the market will adopt the idea that: As the AI boom approaches the reality of selling more AI software to a ‘cyclical’ consumer, the AI theme narrative itself can no longer be accepted as ‘structural’.
Consumers – the individuals and companies that need to buy artificial intelligence (AI) products to generate acceptable returns for the hyperscalers to justify the trillions they spend on AI infrastructure – are cyclical. They may not be able to buy enough AI software to stack up the numbers. We recently offered some calculations showing that this is not the case. They can’t.
And maybe, just maybe, the rest of the market will catch on. Therefore, sentiment seems to have changed.
Is the AI boom over?
Does (last) week’s price action mean the AI boom is over? Are we at the absolute top of this multi-year rally in tech? Probably not. But who knows? We can’t explain that after a one-day price action. Remember, markets can remain irrational for longer than most expect, and Nvidia’s fundamentals are incredibly strong. It’s likely this isn’t the height of the AI boom.
However, Thursday’s sharp intraday reversal (November 20, 2025) should not be ignored. It suggests that investors are wondering beneath the surface how much more upside potential has already been priced in, especially as valuations have stretched and broader economic uncertainties persist.
It’s the first shot over the bow of the boat. The first crack in the polished concrete that forms the basis of the AI tree.
What to do now?
If you have a strong interest in AI themes and AI-related growth stocks, now is a good time to take a step back and stress test your investments. Ask yourself: How would my portfolio hold up if we see a meaningful pullback or rotation in these high flyers in the coming weeks or months?
Some investors have rebalanced, reducing exposure to their AI winners and exchange-traded index funds (ETFs) like the S&P 500, which has a huge weighting to the AI hyperscalers, and have turned to private credit and AA-rated market-neutral funds. Some have slightly increased their cash weighting. Berkshire Hathaway currently has a record $381.7 billion in cash, or about 53.6 percent of its portfolio.
Few financial advisors would suggest that investors hold so much cash, often because it would have tax implications and increase the burden of re-entering the market at the right time.
Nevertheless, a cautious assessment now can go a long way toward protecting the gains you made during this extraordinary run.
(Note: this article was written on November 21, 2025, so all prices and movements refer to this date.)
He is also the author of the best-selling investing guide to the stock market, Value.able – how to value and buy the best stocks for less than they are worth.
Roger regularly appears on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
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