Buffett Indicator hits 232.5 per cent as AI frenzy fuels overvaluation warnings
The metric, which divides the Wilshire 5000 Index by US annual GDP, has reached its highest level since 1970, placing markets in a significantly overvalued zone despite continued institutional buying in tech giants.
Warren Buffett’s preferred gauge of market valuation has surged to approximately 232.5 per cent, marking its highest level since data collection began in 1970. The indicator, which divides the Wilshire 5000 Index by US annual gross domestic product, has risen 13 per cent from lows recorded on 30 March. According to data from GuruFocus, this elevation places the market in a significantly overvalued zone, a condition that historically suggests potential for modest negative returns over the subsequent year.
The warning comes amidst a sustained surge in artificial intelligence stock valuations. Goldman Sachs strategist Ben Snider noted that trading activity in US stocks with high enterprise value-to-sales multiples is near a decades high, a level exceeded only during the dot-com bubble peak in 2000. Snider observed that the velocity of the recent equity market rally has generated investor anxiety regarding the sustainability of the bull market, prompting a search for signals that a peak may be near.
Despite these cautionary signals, Berkshire Hathaway has maintained its exposure to key technology names. The conglomerate has kept its position in Apple and recently added to its holdings in Alphabet. Current Berkshire Hathaway CEO Greg Abel committed a $10 billion investment to Alphabet to fund the tech giant’s expanding artificial intelligence infrastructure, underscoring a long-term conviction in the sector despite short-term valuation concerns.
The Buffett Indicator gained prominence following a 2001 Fortune magazine article co-authored by Buffett and Carol Loomis. Buffett described the ratio as probably the best single measure of where valuations stand at any given moment, while simultaneously acknowledging its limitations in providing a complete picture of market health. The Wilshire 5000 Index is widely regarded as a proxy for the total US stock market, making the metric a broad barometer of equity risk.
Broader market momentum remains evident in other major technology stocks. Amazon shares rose 31.9 per cent in a single month following its fourth-quarter fiscal 2025 report, which beat expectations with $213.4 billion in revenue and $25 billion in operating income. This performance was driven by strong institutional buying and unusual buy pressure, highlighting the continued appetite for large-cap tech assets even as valuation metrics flash warning signs.
