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Albert Edwards, the Global Strategist at Société Générale, has raised a red flag on the current state of the U.S. equity market. He believes that the market, largely driven by tech and AI, is in the throes of a dangerous bubble that could have dire consequences.
Edwards, known for his bearish outlook, drew parallels between the current market situation and the dot-com bubble of the late 1990s. In an interview with Fortune, he pointed to the soaring valuations of tech companies, some trading at over 30 times forward earnings, as a clear sign of a bubble.
The analyst also highlighted a key difference in the current scenario: the economy’s heavy dependence on the AI theme, not just for business investments but also for consumer spending, which is being driven more than usual by the top quintile of wealthy Americans. This, he warned, makes the economy more vulnerable than during previous bubbles.
Despite his track record, which includes accurately predicting the dot-com bubble but also making warnings that didn’t materialize, Edwards remains steadfast in his belief that the current situation is alarming. He noted that the U.S. has not experienced a recession since 2008, and this prolonged period of growth has only heightened his concerns.
"Generally, when you're gripped by a bubble, people just don't want to listen because they're making so much money." said Edwards.
The warning from Edwards adds to a growing chorus of concerns about the state of the U.S. economy, particularly its reliance on AI and tech. Ruchir Sharma, an investor and author, recently suggested that the U.S. economy’s heavy reliance on AI could lead to a burst of the AI bubble.
Over the past 5 trading days, the S&P 500 fell 1.65%, while NASDAQ declined 2.26%, led by a tech sell-off, despite a blockbuster result from Nvidia Corp. (NASDAQ:NVDA) reflecting investor concerns over the AI bubble. During the same period, Nvidia stock dropped 3.90%, with CEO Jensen Huang reportedly slamming the market’s lackluster reaction and expressing his dissatisfaction.
Meanwhile, Bill Gates has acknowledged the existence of an AI bubble but has cautioned that it’s not comparable to historical bubbles. Additionally, Wedbush analyst Dan Ives reiterated, “This is not an AI Bubble and Nvidia’s blowout quarter and bullish demand commentary around Blackwell/Rubin is what we focus on despite this sell-off.”
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Posted In: NVDA
