These 11 Stocks Are Probably in a Bubble. It’s Time to Get Out.

MP Materials is on Trivariate’s bubble list. (Courtesy Michael Tessler/MP Materials)

The buzz on Wall Street is whether the stock market is in a bubble. It’s tough to pin down the right answer, but it’s plain to see that a select group of names probably are.

The S&P 500 is up almost 15% this year, extending what has now been a three-year bull market, driven by steady economic growth, inflation that has dropped enough for the Fed to cut rates, and a brand-new boom in AI.

And that’s one snag to nailing the yes-no question about a bubble. Are companies spending too much on data centers, which are essential for AI? If data center spending suddenly slows down, stock in companies that build them will tumble because they’ve already enjoyed massive gains.

Another snag—and one that has just come on to the scene—is whether banks can handle any bad private-credit loans they that might have made. If a private credit fund defaults on its debt, it could drag down a major bank, though the risk of that today seems pretty low.

Of course, when or if these risks come to pass is really hard to predict. So, instead of looking at the entire market, we’re going to point out individual stocks that probably are in bubbles.

Trivariate Research’s founder Adam Parker put together a list of names that appear to be at the highest risk of collapsing. Here’s why: they’ve gained at least 100% in the six months ended Friday, and traded in the top 10% of enterprise value-to-forecast sales for the coming 12 months out of a basket of 3000 U.S. stocks. Put simply, they’re among the most expensive stocks.

They also had to have high short interest, with many featuring short interest as a percentage of their total shares outstanding in the teens or higher, versus high single digits on average between the S&P 500 and Nasdaq. The translation: traders have made large bets that these stocks will drop within the next few months.

Also, each name had to score in the bottom half of Trivariate’s quality model. That makes a stock particularly volatile, either because the company is losing money or because it often fails to meet the market’s profit expectations. Relatedly, each company on the list has to have analyst 2026 earnings forecasts that are lower than the projection at the start of this year.

Overall, these stocks are primed to drop if they disappoint the market, given that they’re way up, while their fundamentals have only worsened.

We picked 11 to name, benefiting from the market’s hopes for future innovations—AI and quantum computing.

Six are quantum computing stocks Rigetti Computing , D-Wave Quantum , and Quantum Computing Inc.; MP Materials , a rare earth metals miner; and software companies Applied Digital and SoundHound .

The other five are uranium, chemical and power companies, a few that are booming from AI investment. They are Uranium Energy, NuScale Power , Eos Energy, PureCycle Technologies, and Bloom Energy.

Parker’s list also has ones that have gained completely on company-specific developments, but it’s no coincidence that many of those are associated with broader growth trends that could endure major setbacks.

Not all of these stocks will collapse, but chances are high that some will.

Buyer, beware.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com