AI stock market bubble may continue before eventual crash, analysts warn
8 reported
A single-source report from The Guardian examines the current state of the stock market, focusing on the artificial intelligence boom and the concentration of equity in seven major tech companies. The article notes that some financial experts have been warning of a potential crash for years, but the market has continued to rise. It highlights that the S&P 500 and Nasdaq indexes are at historically high levels, with the top 10 companies in the S&P 500 accounting for about 40% of the index’s total market capitalisation, exceeding the 27% peak during the 1999-2000 tech bubble. The report cites warnings from Ludovic Subran, chief investment officer at Allianz, who said SpaceX’s $25bn bond sale after a record-breaking listing indicated “bubble territory.” Jeremy Grantham, founder of a large asset manager, stated the AI bubble was about to burst and he was selling up. Dhaval Joshi of BCA Research called the situation the “madness of crowds” and said he is watching for an economic recession or aggressive interest rate rises as triggers for a crash. The article concludes that the bubble may have further to run due to strong profits from top companies, a US president willing to keep markets happy, and global savings seeking investment.
What’s reported
The article focuses on the New York stock market indexes, the S&P 500 and the tech-heavy Nasdaq.
The Magnificent Seven companies are Amazon, Alphabet (Google), Nvidia, Meta (Facebook), Microsoft, Apple, and Tesla (possibly soon to merge with SpaceX).
The 10 largest companies in the S&P 500 account for about 40% of the index’s total market capitalisation, above the 27% peak during the 1999-2000 tech bubble.
Ludovic Subran, chief investment officer at Allianz, said SpaceX’s $25bn bond sale after raising $86bn from its listing was a sign of “bubble territory.”
Jeremy Grantham, founder and investment adviser of a large asset manager, said the AI bubble was about to burst and he was selling up.
Dhaval Joshi, head of global strategy at BCA Research, called the situation the “madness of crowds” and cited a study on investment cycles.
The article states that Google and Meta are advertising businesses and questions whether they will sell enough ads to justify their share prices.
The article says a crash is coming but no one can predict the trigger.
Key figures
Ludovic Subran, chief investment officer at Allianz
Jeremy Grantham, founder and investment adviser of a large asset manager
Dhaval Joshi, head of global strategy at BCA Research
Sources: The Guardian
