Market jitters are growing as experts question whether the AI boom is inflating a bubble in the stock market. Tom Essaye from Sevens Report Research notes that stubborn semiconductor stocks – essential for powering AI technology – are underperforming, even as the S&P 500 edges close to record highs. The robust rally since April, amplified by the excitement following ChatGPT’s launch in late 2022, is pushing market valuations to levels reminiscent of past bubbles in 1929 and 2000.
Essaye reminds us that every historic bubble has been fuelled by a compelling narrative, whether it was the promise of the internet or the lure of real estate. He points to the PHLX Semiconductor Index (SOX) as a key indicator of the AI market’s health. Its lag behind the broader market raises concerns that if AI remains the sole driver of bullish sentiment, the rally might not last. Adding to the caution is a softening US economic outlook – recent job data and rising jobless claims suggest that if the current resilience falters, the market could well be setting up for a more significant downturn.
