Market analysts are raising concerns about the current state of global equity markets, with many stocks trading at historically high price-to-earnings multiples. This has led to speculation about the existence of an artificial intelligence (AI) bubble, prompting fears that the markets may be overheating. For some investors, a stock market crash could spell disaster; however, for others, it might present a unique opportunity to enhance their long-term financial standing.
Stock market crashes are often fueled by human emotional responses rather than objective assessments. Investors frequently react irrationally to isolated events, driven by panic and a desire to mitigate losses by selling off their shares. Despite these short-term disruptions, historical patterns suggest that calm eventually returns, and markets recover over time. An analysis of historical data reveals that recovering from past market crashes in the UK often leads to substantial rebounds, demonstrating the long-term potential for patient investors.
For those with available capital, market overreactions can yield valuable buying opportunities. Maintaining a watchlist of potential stocks can be a strategic move in anticipation of such events. For instance, Scottish Mortgage Investment Trust (LSE:SMT) serves as a stunning example of this strategy; after the dot-com bubble burst in 2000, a disciplined investor who purchased the stock during that downturn saw its value increase significantly. From March 2000 to October 2022, the trust’s share price initially fell 46%, but within three years, it had fully recovered and is now valued at approximately 22 times its low in 2022.
While it is challenging to precisely time market movements, the historical context provides valuable insights into the merits of adopting a long-term investment perspective. Analysts suggest that, should a decline occur in the AI sector, the impacts would be amplified given the sector’s focus on high-growth stocks, particularly in technology. Nevertheless, Scottish Mortgage’s performance has remained commendable; the trust’s share price surged by 351% between 2016 and 2025, surpassing the performance of the FTSE All-Share index considerably.
A point of concern for investors is the trust’s significant allocation to private companies, accounting for over 35% of assets as of December 2025. This portion raises challenges related to valuing these investments accurately and the liquidity issues that might arise when a rapid conversion to cash is necessary.
Yet, there’s optimism surrounding the trust’s primary holding—SpaceX—which is anticipated to file for an IPO this summer. Such a development could prove advantageous for Scottish Mortgage Trust, potentially leading to substantial profit.
For more risk-averse investors eager to engage with emerging AI technologies, this stock might be worthy of consideration. With its diverse portfolio of about 100 different positions, it offers a mix of investments while acknowledging the inherent vulnerabilities associated with tech-heavy allocations, especially amid market volatility. Should an impending market crash become probable, now could be the right moment to start saving and preparing to make calculated investment decisions.
Conversely, a more optimistic outlook suggests that investing in Scottish Mortgage Trust could be advantageous even at present. The impact of AI on society is inevitable and expansive, and by investing broadly within the sector, the trust positions itself to capitalize on successes. Even a few successful investments could lead to notable gains for shareholders, making this an intriguing option for potential investors in today’s dynamic market landscape.
