‘AI-Driven Bubble’ May Burst And Drag Down Stock Market, JPMorgan Says

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Fallout from elevated interest rates, an “erosion” of personal savings and a “deeply troubling” geopolitical situation will lead to broad market declines, according to strategists at the world’s largest bank.

The S&P 500 is up nearly 20% this year thanks in large part to $1.9 trillion worth of gains among top AI players like Nvidia, Alphabet and Microsoft. The narrow concentration of the gains could justify a broader rally among stocks left out of the multiple explosion party so far, Goldman Sachs analysts led by David Kostin laid out in a Friday note.

If the price-to-earnings multiple of the 493 S&P constituents not named Alphabet, Apple, Amazon Microsoft Meta, Nvidia or Tesla raises just from its current level of 17x to 19x, the S&P will rally to an all-time high, Goldman forecasted.Now’s a “good entry point” for commodities as the asset class prices in “by far the highest risk of recession and stand out as under-valued, under-owned, and backed by compelling fundamentals and technicals,” Kolanovic wrote.

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