Stock investors were jolted by another bout of AI-related volatility this week, leaving many asking whether this was the first sign of the AI bubble popping.
Wall Street’s tech-heavy Nasdaq Composite index fell 4.6 per cent over the week. In South Korea, where the stock market is heavily weighted towards the memory sector, the Kospi index fell more than 7 per cent and trading was halted twice during the week.
Trevor Greetham, head of multi-asset investing at Royal London Asset Management, said he believes there is a bubble in both valuations and earnings in the tech sector. But this particular sell-off, he said, was a “short-term wobble in terms of rate expectations” after the Federal Reserve hinted this month that its next move could be to raise interest rates. While Greetham said tech earnings “can’t be sustained”, he added that the rally was not over yet.