The artificial intelligence-fueled rally that sent stocks soaring into the summer is hitting speed bumps as companies report second-quarter earnings.

Microsoft (MSFT), considered a software leader in the space, told investors late last month that AI contributions to revenue will be gradual. AMD (AMD) said it expects the market for AI accelerators to reach more than $150 billion by 2027. But the long-term projections didn't help the stock, which fell more than 7% in the next trading session as analysts feared expectations may have grown too high.

Overall, the Nasdaq Composite (AMD) is now down nearly 2% over the last two weeks, which spanned most of big tech earnings.

The signs could point to the AI stock bubble popping. On Monday, Morgan Stanley equity strategist Edward Stanley released an analysis of 70 prior bubbles over the past 100 years, including the dot-com surge and recent excitement in cryptocurrencies. The median return in three years for those bubbles is 154%. If Nvidia (NVDA), which is up 200% so far this year, and large cap tech are the proxy for how far the AI boom has gone, then it's likely "late innings" for the AI stock rally, Stanley wrote.

"With typical 3-year returns into bubble peaks of 150%, one could argue that this rally surpasses most others," Stanley wrote.

But Stanley believes the AI bubble of 2023 isn't the same as those other 70 bubbles. For one, measuring the rally is hard given that the AI index Morgan Stanley tracks is up just 50% this year, compared to the 200% surge in large cap tech.

"Judging where we are on the run-up in market exuberance is extremely challenging," Stanley wrote. "This is the case with AI today. Many investors would be forgiven for thinking AI investment funds are making new all-time highs on the back of Generative AI excitement. In fact, (they're) not. Several underlying stocks are, but as an investment theme, performance is still 14% below prior market high."

Wall Street buzz quieting down

AI has been the buzzword of Wall Street in 2023. It sent strategists boosting their outlook on the S&P 500. Roundhilll created a new buzzy ETF called CHAT, and investors have been searching deep into the world of tech to find the next big AI winner.

Entering second-quarter earnings season, the AI promise seemed to still be fueling stock jumps. In July, a Bloomberg report about Apple working on its own form of ChatGPT sent the stock up about 1%. A day before, Microsoft shares rose about 4% as the company announced pricing for its M365 Copilot AI product. Both stocks finished at all-time highs on the day the developments broke.