Investors may be in for a rude awakening if they continue to invest heavily in stocks related to artificial intelligence (AI). Economist David Rosenberg, noted for his bearish views, believes there is a major price bubble forming in AI stocks. He recently shared these views on CNBC’s “Fast Money” show, warning that the rally is on borrowed time.
Rosenberg points to the Nasdaq 100 breakout over the last 6 months as being similar to the dot-com boom of the late 90s. A key factor to note in the AI rally is that just 7 mega-caps have made up 90% of the price performance in the S&P 500, a situation that Rosenberg sees as similar to just before the dot-com burst. That being said, Nvidia — one of the key AI companies — reported a strong earnings beat driving up enthusiasm for AI stocks which has seen record highs.
However, Rosenberg is concerned about other stocks such as banks, consumer discretionary stocks, and transports, all of which are down more than 30% from the highs cycle and behaving in the same pattern seen just prior to the past four recessions.
David Rosenberg is an economist and the president of Rosenberg Research. He served as the Chief North American Economist at Merrill Lynch from 2002 to 2009. He is a well-known contrarian investor, often bearing a bearish outlook. His views on the current AI enthusiasm are a warning to investors looking to capitalize on the AI rally.
Nvidia is a computer technology company best known for its in computer graphics, game consoles, and AI computing. The company designs and manufactures graphics processing units, game consoles, and AI processors. The company’s products are used in gaming, data centers, automotive, and professional visualisation markets. In its recent earnings report, Nvidia saw an annual guidance upgrade, propelling the share price and driving new levels of enthusiasm for AI stocks.
