Despite Friday's market selloff and banks set to kick off earnings season in the coming week, U.S. stocks continue to hover near historic highs. Wall Street is anticipating that the momentum behind this year's impressive AI-driven rally will continue.

Since the April lows, the S&P 500 Index (^GSPC) has climbed over 30%, gaining approximately 1,800 points, while the Nasdaq Composite has surged about 50% over the same period, delivering a spectacular six-month rally.

According to FactSet data, Wall Street expects S&P 500 component companies' third-quarter earnings to grow 8% year-over-year. If this expectation materializes, it would mark the ninth consecutive quarter of corporate profit growth.

During this earnings season, technology companies are providing guidance above all other sectors, with software and semiconductor firms contributing the majority of optimistic forecasts.

Recently, a major collaboration between ChatGPT developer OpenAI (OPAI.PVT, privately held) and chipmaker Advanced Micro Devices has reignited market discussions about whether "the current market has fallen into a pure bubble."

Lisa Schreiber, investment analyst at Gradient Investments, told Yahoo Finance: "Current market valuations are elevated, so it's necessary to examine this situation more carefully. However, I don't believe we're currently in a bubble because corporate fundamentals remain strong—these companies continue to exceed earnings expectations quarter after quarter."

Nicholas Colas, co-founder of DataTrek Research, noted in a recent report that the S&P 500's current forward price-to-earnings ratio (based on this year's expected earnings) is approximately 25 times, a level that "reflects market confidence in corporate earnings delivery that goes well beyond reasonable confidence levels."

Goldman Sachs analysts stated last week that the current market has not fallen into a bubble, pointing out that "those leading companies with the largest gains have exceptionally strong balance sheets."

Meanwhile, UBS analysts expect global artificial intelligence capital expenditure (CAPEX) to increase 67% year-over-year in 2025.

The UBS strategy team wrote in last week's report: "In our view, this stock market rally still has three key supports: solid corporate fundamentals, accelerating AI application deployment, and an overall favorable macroeconomic environment. Investors should consider gradually increasing allocations during any market pullbacks."

However, so far, the market has provided virtually no pullback opportunities for "buying the dip."

Core AI-driven sectors—including Technology (XLK), Communication Services (XLC), Utilities (XLU), and Industrials (XLI)—all remain near historic highs, and Wall Street strategists continue to raise S&P 500 target levels.

Nevertheless, not everyone is convinced.

Jim Masturzo, Chief Investment Officer of Multi-Asset Strategy at Research Affiliates, told Yahoo Finance: "In our view, U.S. stock market valuations remain overvalued, and this overvaluation has persisted for an extended period. We're beginning to sense that investors are counting on lower interest rates and monetary policy intervention to support the continuation of the current rally."

The Federal Reserve's latest policy meeting minutes show officials are inclined toward another rate cut this month, with the possibility of one more cut before year-end if labor market weakness continues.

The accommodative monetary policy environment and strong stock market performance may already be helping to ease consumer concerns.

Last Thursday, Delta Air Lines reported growth in both premium passenger and domestic route businesses. After being affected by tariff-related adverse factors in the first half of the year amid low market sentiment, business travel demand has shown signs of recovery.

Delta Air Lines CEO Ed Bastian told Yahoo Finance: "I'm pleased to report that third-quarter business has quickly rebounded, and the company is steadily progressing toward our expected targets for the year."

However, Wall Street remains closely watching for any signs indicating increased consumer pressure. Last Friday, President Trump announced additional 100% tariffs on Chinese goods starting in November. While companies previously faced challenges in a generally manageable environment, this new measure adds fresh uncertainty to the market.

Cindy Beaulieu, Chief Investment Officer for North America at Conning, stated: "We haven't yet seen actual pass-through effects of tariffs on inflation, which means some companies are already facing challenges in dealing with tariffs and experiencing some degree of margin compression. Therefore, third-quarter corporate earnings growth may slow slightly, but there are no concerning signs yet."