The strong share price growth of stocks belonging to the artificial intelligence technology sector worries analysts about the formation of a possible financial bubble.
Much of the recovery in US stock indices has been driven by the dramatic increase in investor interest in companies operating in the artificial intelligence sector.
Some analysts are concerned about the graphic extension of many shares listed on the US stock exchange that have to do with AI. Although it is probably too early to talk about a real financial bubble, there seem to be all the pretexts for its progressive formation.
Although it is not perfectly representative of stocks related to artificial intelligence, many analysts use the technological index Nasdaq to monitor the sentiment of the sector, comparing it to some ETFs that aim to weigh exposure to AI.
What drives up the prices of AI-related stocks?
The investment of US big tech resources in the implementation of AI technologies to support corporate businesses has triggered an unprecedented wave of purchases on the equity sector. In 2023, the stocks of the most active companies in the artificial intelligence sector accounted for significant capital increases: Microsoft, for example, has grown more than 40% since the lows of 2023, approaching once again at its absolute highs, despite the economic difficulties of the moment.
For this reason, many analysts support the idea that a new financial bubble is forming in the financial sector linked to artificial intelligence. Bank of America’s Michael Hartnett argues that the bubble is already starting to form, expressing concern about the consequences that a Fed rate hike could cause.
However, looking at past bubbles, it is easy to see that AI is still relatively small, in its infancy. However, the graphical scale of companies like Microsoft (MSFT) and Nvidia Corp. (NVDA) frightens technical analysts at the possibility that the artificial intelligence business cannot justify the enormous current investment inflow.
Nasdaq and Xtrackers Artificial Intelligence and Big Data ETFs: what’s happening to the AI sector?
The US technology index has posted a gain of 25% year-to-date, despite recession fears. The ETF Xtrackers Artificial Intelligence and Big Data also returned a return of around 25%. Taking instead the Nasdaq equal weighted as a reference, we note that the index has only recorded a performance of 7% since the beginning of the year.
Basically, a large part of the boost recorded by the index of technological stocks is due to the strong stock market growth of stocks related to the artificial intelligence sector, especially the big tech, fueling fears related to the fact that a new speculative bubble is being created.
Original article published on Money.it Italy 2023-05-22 17:45:00. Original title: L’intelligenza artificiale è in bolla speculativa: azioni del settore pronte a esplodere?
