Wall Street analysts are warning that the artificial intelligence boom may be turning into a market bubble. Recent surveys and executive comments point to rising concerns about stretched valuations and investor exuberance. JPMorgan CEO Jamie Dimon told reporters on Tuesday that elevated asset prices create more downside risk. He said many assets appear to be entering bubble territory, though he noted that does not mean prices cannot rise another 20 percent.
Investor Optimism Hits Extremes
According to Yahoo Finance, Bank of America’s latest Global Fund Manager Survey cited an AI equity bubble as the top global tail risk for the first time. The survey polls around 200 fund managers who oversee nearly $500 billion in assets. Cash levels among these managers fell to 3.8 percent, close to the bank’s sell threshold of 3.7 percent. Readings below 4 percent have historically marked periods of peak risk appetite.
State Street’s Risk Appetite Index shows large institutional investors entered the fourth quarter as bullish as they have been all year. They added to riskier assets for five straight months. DataTrek Research co-founder Nicholas Colas wrote that absent a very large shock, these investors are unlikely to change their views soon.
Record Corporate Spending Fuels Concerns
Tech Giants Double Down on AI Infrastructure
Companies continue to pour billions into AI projects. Google just announced a $15 billion investment in India to build its largest data center hub outside the United States. AMD shares rose after the company revealed a new chip partnership with Oracle. Walmart also unveiled a partnership with OpenAI to expand AI-powered retail tools.
Michael O’Rourke, chief market strategist at JonesTrading, said he absolutely believes the market is in an AI bubble. He pointed to OpenAI’s roughly $1.5 trillion in AI build-out plans, which contrast sharply with the company’s $13 billion in annual revenue and lack of profitability. O’Rourke said that disconnect should alert investors to potential risks. He added that Big Tech’s next earnings reports could reveal whether spending on AI infrastructure is finally hitting a wall.
Not all analysts agree the rally represents a bubble. Lale Akoner, global market analyst at eToro, said the market has moved past early discovery into pricing to perfection. She noted that investors are pricing the story over execution, but she does not see manic psychology. Akoner said tech firms remain strong in terms of balance sheets, making this more of a priced-for-perfection scenario than a bubble.
