Game of Trades: Why the Tech bubble is About to Trigger the Largest Market Collapse Since 2008
While the markets have focused largely on the debt ceiling debates in the past few weeks, tech stocks have broken the sideways trend. They’ve moved higher on the back of not only strong earnings, but on the future earnings potential of artificial intelligence (AI).
That’s helped several hardware and software companies see a big move higher. It’s even been a move greater than the mini-AI rally at the start of the year.
While that’s helped a handful of stocks, it’s created a higher likelihood of a market pullback. That’s because the recent market move higher has largely occurred amid a backdrop of a narrow rally.
Big cap tech stocks dominate the market indices, which are weighed by market cap. So it only takes a big move from one big-name stock to rally the market as a whole.
The push into AI stocks in the past few weeks has created one of the narrowest market breadths in history. And it’s not just prices that have jumped higher. The move higher has exceeded an increase in potential profits. The result? Markets are at their highest valuation relative to revenues since the tech bubble.
That could set up the market for a big drop, particularly in tech stocks, in the months ahead.