The Bank of England has issued a stark warning about the current surge in AI-related stocks. According to recent remarks, stock valuations are now ‘stretched’ to levels not seen since the peak of the dot-com bubble. This signals potential risks for investors who are riding the artificial intelligence wave in equity markets.
AI Mania and Market Concentration
The top five members of the S&P 500 now control nearly 30% of the market share. This is a record high for any point in the last 50 years. Such concentration means that the performance of a handful of tech giants—largely driven by AI innovation—heavily influences the entire US stock market.
Echoes of the Dot-Com Bubble
Experts at the Bank of England have drawn direct comparisons to the late 1990s, when tech stocks soared unsustainably before crashing. Today’s enthusiasm for artificial intelligence has inflated equity valuations to levels ‘comparable to the dot-com bubble.’ Investors should be cautious and consider the underlying fundamentals before jumping on the AI bandwagon.
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