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Albert Edwardsthe Global Strategist at Société Généraleraised a red flag on the current state of the US equity market. He believes that the market, driven largely by technology and AI, is on the edge 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 technology companies, some trading at more than 30 times forward earnings, as a clear sign of a bubble.
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The analyst also highlighted a key difference in the current scenario: the strong dependence of the economy on the theme of AI, not only 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 record, which includes accurately predicting the dot-com bubble but also making warnings that did not materialize, Edwards remains steadfast in his belief that the current situation is alarming. He noted that the United States has not experienced a recession since 2008, and this prolonged period of growth only increased his concerns.
“Usually, when you’re caught in a bubble, people just don’t want to listen because they’re making a lot of money.” Edwards said.
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The warning from Edwards adds to the growing chorus of concerns about the state of the US economy, particularly its reliance on AI and technology. Ruchir Sharmainvestor and author, recently suggested that the heavy reliance of the US economy on AI could lead to a bursting of the AI bubble.
Over the last 5 trading days, the S&P 500 fell 1.65%, while the NASDAQ fell 2.26%, led by a technology selloff, despite a blockbuster result from Nvidia Corp. (NASDAQ:NVDA) reflecting investor concerns about the AI bubble. During the same period, Nvidia stock fell 3.90%, with CEO Jensen Huang Allegedly slamming lackluster market reaction and expressing his dissatisfaction.
Meanwhile, Bill Gates acknowledged the existence of an AI bubble but warned that it is not comparable to historical bubbles. In addition, 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 selloff.”
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