The artificial intelligence boom has been one of Wall Street’s defining themes of 2025. Yet the industry’s latest accolade—the TIME Magazine Person of the Year award to the "creators of AI"—has sparked unease among investors. For some, the honor is less a celebration than a warning, reviving talk of the notorious "magazine cover curse."
The Cover Curse Explained
The so-called cover curse, or magazine cover indicator, dates back to the 1960s when analyst Paul Macrae Montgomery observed that when a hot investment theme appeared on the cover of a mainstream publication like Time, it often signaled the end of the rally. His logic was simple: by the time a trend is popular enough to make the cover, most of the profits have already been priced in.
Montgomery’s work has been preserved by market veterans like Barry Ritholtz, who outlined three conditions for the indicator to hold true:
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The cover must be from a mainstream, non-commercial publication.
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The theme must be widely known to the public.
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Asset prices must have already surged significantly.
AI meets all three.
TIME’s 2025 Person of the Year
TIME unveiled two covers this year: one featuring an art design centered on "AI," and another depicting tech leaders including Jensen Huang, Mark Zuckerberg, Elon Musk, Lisa Su, Fei-Fei Li, Dario Amodei, and Demis Hassabis. The magazine noted that the debate over cautious deployment has given way to a race to roll out AI as quickly as possible.
The timing was uncanny. On the same day, Oracle (ORCL-US) reported disappointing earnings, sending its stock down sharply and dragging other AI-related names lower. The Nasdaq Composite, heavily weighted toward tech, remains below its October peak, while the Dow Jones and S&P 500 continue to notch new highs—suggesting a rotation away from AI-driven software into other sectors.
Historical Data: A Contrarian Signal
Research supports the contrarian view. Jim Bianco of Bianco Research notes that TIME’s Person of the Year has long been considered a warning sign. Brent Donnelly of Spectra Markets analyzed past covers and found that when TIME focused on investable industries or leaders, only 13% outperformed the market one year later. Even over two years, the figure rose only to 25%.
The lone exception was Andy Grove of Intel, named Person of the Year in 1997. But even Intel suffered a steep decline when the dot-com bubble burst.
Donnelly argues that the statistical results reinforce a clear signal: AI has become a consensus trade. With Nvidia and other AI leaders already priced for perfection, the risk of disappointment is rising.
Yardeni’s Warning
Veteran strategist Ed Yardeni has also sounded alarms. He recently abandoned his long-standing overweight recommendation on tech and communication services, citing intensifying competition in AI. Yardeni argues that the AI race has eroded the moats once enjoyed by the "Magnificent Seven" tech giants. Instead of dominating separate niches, they are now colliding head-on in the same arena.
This "game of power," as Yardeni calls it, raises the risk of margin compression and slower growth, even for industry leaders.
Investor Sentiment: Skepticism Creeps In
For more than a month, AI concept stocks have faced skepticism. Concerns about overvaluation and the sustainability of growth momentum have weighed on sentiment. The Nasdaq’s inability to reclaim its highs contrasts with the broader market’s resilience, underscoring investor caution.
The cover curse adds psychological weight. As Ritholtz notes, when editors at mainstream outlets spotlight an investment trend, it often means the story has reached peak popularity. For investors, that can be a signal to reassess positions.
Why AI May Be Different
Still, not everyone is convinced the curse applies. AI is not a single product cycle but a transformative technology with applications across industries. From cloud computing to robotics, healthcare to finance, AI’s reach is vast. Bulls argue that even if valuations are stretched, the long-term potential justifies continued investment.
Yet history suggests caution. The dot-com boom was also hailed as transformative, but many companies collapsed when expectations outpaced reality. The challenge for AI investors is distinguishing between firms with durable business models and those riding hype.
Rotation in Play
The divergence between indices highlights a rotation. While the Dow and S&P 500 hit new highs, the Nasdaq lags. This suggests funds are moving into sectors less exposed to AI volatility—industrials, energy, and consumer staples. For investors, the message is clear: diversification matters, especially when consensus trades dominate headlines.
Looking Ahead to 2026
Goldman Sachs and other analysts recommend monitoring consumer and corporate trends closely into early 2026. If AI-related spending slows or earnings disappoint, the cover curse could prove prescient. Conversely, if AI adoption accelerates across industries, the sector may defy historical patterns.
Either way, the TIME cover has crystallized a debate: is AI at the peak of its hype cycle, or just entering its next phase of growth?
Conclusion: A Symbol and a Signal
TIME’s recognition of AI leaders as Person of the Year is a symbolic milestone for the industry. But for markets, it may also be a contrarian signal. With valuations stretched, competition intensifying, and investor sentiment cooling, the risk of a pullback is real.
Whether the cover curse strikes again remains to be seen. For now, investors would be wise to balance optimism with caution, remembering that when an investment theme becomes mainstream enough to grace a magazine cover, the easy money may already be gone.