[ad_1]
Investors Paying a Hefty Price for AI Exposure, says Economist David Rosenberg
Economist David Rosenberg believes that investors piling into stocks with artificial intelligence exposure may pay a hefty price. He believes that the enthusiasm surrounding AI has become a major distraction from recession risks. According to Rosenberg, the AI surge has striking similarities to the late 1990s dot-com boom, particularly when it comes to the Nasdaq 100 breakout over the past six months.
Rosenberg Research President Talks About a Price Bubble
Rosenberg Research President said that there is “no question that we have a price bubble.” In a recent note to clients, Rosenberg warned that the AI rally is on borrowed time. “There are breadth measures for the S&P 500 that are the worst since 1999. Just seven mega-caps have accounted for 90% of this year’s price performance,” he wrote. “You look at the tech weighting in the S&P 500 and it is up to 27%, where it was heading into 2000 as the dotcom bubble was peaking out and soon to roll over in spectacular fashion.”
AI Competitors’ Surge
This week, Nvidia’s blowout quarter helped to drive AI excitement to new levels. The chipmaker boosted its yearly forecast after delivering a strong quarterly earnings beat after Wednesday’s market close. Nvidia CEO Jensen Huang cited booming demand for its AI chips. Nvidia stock gained more than 24% after the report and is now up 133% over the last six months. AI competitors Alphabet, Microsoft, and Palantir are also seeing a stock surge.
Possible Recession Risks
While mega cap tech outperforms, Rosenberg sees ominous trading activity in banks, consumer discretionary stocks, and transports. “They have the highest torque to GDP. They’re down more than 30% from the cycle highs,” Rosenberg said. “They’re actually behaving in the exact same pattern they have going into the past four recessions.”
Conclusion
In conclusion, investors must be aware of the potential bubble in stocks with artificial intelligence exposure, and the risks of a recession. As Rosenberg suggests, breadth measures for the S&P 500 are the worst since 1999, and the tech weighting in the S&P 500 is up to 27%, resembling the dot-com bubble peak of 2000. Investors must remain cautious and monitor trading activity in banks, consumer discretionary stocks, and transports that may indicate a possible recession.
FAQ
What is AI, and why is it significant?
Artificial intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think and learn like humans. AI technology has many potential applications, such as autonomous vehicles, natural language processing, and predictive analytics.
What are the risks of investing in AI stocks?
There is a potential bubble in stocks with artificial intelligence exposure, similar to the dot-com bubble of the late 1990s. Investors must be cautious and monitor trading activity in banks, consumer discretionary stocks, and transports that may indicate a possible recession.
Which companies are experiencing a stock surge in AI?
AI competitors such as Alphabet, Microsoft, and Palantir are experiencing a stock surge. Nvidia gained more than 24% after the report and is now up 133% over the last six months, driven by booming demand for its AI chips.
[ad_2]
For more information, please refer this link