US stocks ‘deeply in AI bubble territory’, warns Port Shelter’s Richard Harris even as markets hit record highs

Wall Street - US Stock Markets

The US equity market has already entered an artificial intelligence (AI)-driven bubble, warned an investment expert, even as Wall Street surged to new highs. All three major indices -- the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average -- closed at record levels on Monday, led by strong gains in technology shares.

Richard Harris, executive director at Port Shelter Investment Management, told CNBC TV18 that the US market is “deeply into” bubble territory, marked by classic warning signs seen in past market manias.

Telltale signs of a market bubble

“If you look at some of the greats who've studied crashes in the past, it's things like high valuation, high debt, reduction of regulation, and a big, big story,” Harris said. “Don't forget in the dotcom bubble we had the dotcom story. In 2008, we had the housing story. Now we've got the AI story with companies basically lending to each other through the supply chain. Nvidia is lending to OpenAI so that OpenAI will buy Nvidia chips… That money ends up in the stock market either through earnings or through inflation of valuation.”

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While he described the AI-led rally as unsustainable, Harris noted that bull markets “die hard” and may continue for some time before a correction occurs. “It could be quite a time before we actually see it really come to a head,” he said, adding that any eventual downturn may be triggered by “some kind of unknown unknown event that we just have no idea what it is likely to be.”

US indices rally: Nvidia, AMD, Intel stocks shine; Qualcomm rises

His warning came on a day when global markets extended their gains on optimism over a potential US-China trade deal. On Wall Street, the Dow Jones Industrial Average rose 0.7 percent, the S&P 500 climbed 1.2 percent, and the Nasdaq Composite advanced 1.9 percent to a record 23,637.46. The rally was fuelled by technology stocks, including a surge in Qualcomm shares, which jumped more than 11 percent after the company unveiled two new AI chips for data centres.

Nvidia, whose GPUs dominate over 90 percent of the AI data centre market, has climbed 42.6 percent so far this year. AMD and Intel stocks have roughly doubled during this period. Among the so-called “Magnificent Seven” stocks, Microsoft is up 26 percent and Alphabet 42 percent year to date, contributing to the Nasdaq Composite’s 22.4 percent rise and the S&P 500’s 16.9 percent gain.

Gold may hedge a potential market reversal

Harris also pointed out that investors are likely to accumulate gold and cash as hedges against potential turmoil. “We are heading for that sort of territory… it could be two years out but we are headed for some sort of reversal,” he said. “In that environment, investors will continue to accumulate gold and cash in fear of something quite serious happening a little bit further on.”

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