Price bubble in AI stocks will wreck rally: economist David Rosenberg

Price bubble in AI stocks will wreck rally: economist David Rosenberg

Investors who invest in stocks equipped with artificial intelligence may pay a heavy price.

Economist David Rosenberg, a bear known for his contrarian views, believes the enthusiasm for AI has become a major distraction from recession risks.

“There’s no question that we have a price bubble,” the president of Rosenberg Research told CNBC’s Fast Money on Thursday.

According to Rosenberg, the AI ​​boom bears striking similarities to the dot-com boom of the late 1990s — especially when it comes to it Nasdaq 100 outbreak in the last six months.

“[This] “It looks very strange,” said Rosenberg, who served as Merrill Lynch’s chief economist for North America from 2002 to 2009. “It’s way too broad.”

This week, Nvidia’s stunning quarter helped take AI excitement to a new level. The chipmaker raised its full-year guidance after posting a sharp rise in quarterly profit after markets closed on Wednesday. Jensen Huang, CEO of Nvidia, pointed to the booming demand for its AI chips.

Nvidia The stock surged more than 24% following the report and is now up 133% over the past six months. AI competitors alphabet, Microsoft And Palantir are also seeing an increase in inventories.

In a recent note to his clients, Rosenberg warned that the rally was just borrowed time.

“There are broad measures for them S&P 500 Those are the worst since 1999. Just seven mega-caps accounted for 90% of this year’s price action,” Rosenberg wrote. “If you look at the technology weighting in the S&P 500, it’s up to 27% where it was headed for.” in 2000, when the dot-com bubble peaked and soon rolled over in spectacular fashion.

As mega-cap tech companies outperform, Rosenberg sees trading activity threatening banksCdiscretion of the consumer stocks and transports.

“They have the highest torque relative to GDP. They’re more than 30% below cycle highs,” Rosenberg said. “They’re actually behaving in exactly the same pattern as before the last four recessions.”