Colette Kress's $3-4 Trillion AI Forecast and What It Means for S&P 500 Investors in 2026

As we move through early 2026, Nvidia’s Chief Financial Officer Colette Kress made headlines last year with a staggering projection that would reshape how we think about artificial intelligence investments. She estimated the industry would see between $3 trillion and $4 trillion in AI infrastructure spending by the end of the decade. That’s a number so enormous it raises a critical question: with such capital flowing into AI projects, should investors still be confident in broad market exposure through the S&P 500? The answer, surprisingly, might be yes—but not without understanding the risks beneath the surface.

The stock market finished 2025 with impressive momentum, delivering an 18% return for the third consecutive year of double-digit gains. However, this performance masks an uncomfortable reality. The S&P 500 has become increasingly concentrated in technology leaders, with artificial intelligence emerging as the primary growth driver. This concentration, combined with the massive capital deployment Colette Kress described, has sparked legitimate concerns about whether valuations can be justified by actual returns.

The Scale of AI Investment vs. Real Returns

When Colette Kress projected $3-4 trillion in AI infrastructure investment through decade’s end, she was describing an unprecedented wave of capital allocation. To put this in perspective, that’s roughly equivalent to the annual output of several major global economies directed entirely toward building the technical foundation for AI systems.

Yet here’s where the concern deepens. Research from Menlo Ventures revealed a sobering statistic: only 3% of users currently pay for AI services. This suggests a massive gap between investment and monetization. The tech giants leveraging AI capabilities are seeing incremental improvements in their products and services, but nothing approaching the game-changing breakthroughs investors seem to be pricing into valuations.

The valuation question becomes even more glaring when examining specific stocks. Palantir Technologies trades at a price-to-sales ratio of 110—a multiple so elevated it could only exist in an environment of extreme optimism. Without the AI hype surrounding the sector, such valuations would seem disconnected from reality.

Are We in a Market Bubble? The Honest Assessment

The evidence suggesting an AI-inflated market is compelling. The returns on invested capital in AI projects remain murky at best. Colette Kress’s projection itself—while coming from a credible industry source—highlights just how much capital is being bet on a future that hasn’t yet materialized into profits.

Yet bubbles are notoriously difficult to predict in real time. The bullish momentum can persist far longer than rational investors expect, and calling a top has historically been a losing game. We could see the S&P 500 decline in 2026, particularly given three consecutive years of strong performance. Or sentiment could remain buoyant if AI adoption accelerates faster than skeptics anticipate. The honest truth is that no one can forecast with certainty whether current valuations represent a genuine bubble or a rational repricing for a transformative technology.

Why Long-Term Investing Still Works in Uncertain Times

Despite the concerns about AI spending and valuation risks, historical data offers a powerful counterpoint. The S&P 500 has consistently delivered positive annualized returns over periods of 10 years or longer, even for investors who bought at all-time highs. This track record suggests that market timing—trying to avoid declines or catch the perfect entry point—remains a futile exercise.

Consider the data: investors who maintained their equity exposure through multiple market cycles, including crashes and corrections, came out substantially ahead compared to those who attempted to sidestep volatility. Even buying during the peak of previous market euphoria proved profitable when held with a sufficiently long time horizon.

The Vanguard S&P 500 ETF, trading under the ticker VOO, embodies this philosophy. With an expense ratio of just 0.03%, it offers broad market exposure at minimal cost. This efficiency matters compound over decades, making it an ideal vehicle for investors who want uncomplicated, diversified market participation.

The Practical Path Forward for 2026 and Beyond

Here’s what the data and market structure tell us: Yes, there are legitimate reasons to worry about AI spending becoming a bubble. Yes, valuations in certain segments look stretched. Yet these concerns shouldn’t paralyze investors or drive them to exit the market entirely. History suggests that timing the market—sitting in cash waiting for a crash—typically underperforms the simple strategy of consistent, disciplined investing.

The most prudent approach is to continue putting money to work on a regular schedule, regardless of market conditions. For investors seeking broad S&P 500 exposure, the Vanguard S&P 500 ETF offers a cost-effective, straightforward solution. Even if 2026 brings volatility or a meaningful decline, investors with a 10+ year horizon have historically been rewarded for staying invested.

Colette Kress’s projection reminds us that transformative shifts in capital allocation are underway. But transformation doesn’t happen overnight, and valuations don’t collapse just because skeptics have concerns. For the long-term investor, the message is clear: maintain your positions, continue to invest systematically, and avoid the temptation to time the market. The evidence suggests that patience, not prediction, remains the most reliable path to building wealth through the S&P 500.