The AI hype is pushing the US stock market to record highs, though risks of rapid selloff are increasing, Bloomberg reported, citing Goldman Sachs Group’s trading desk. The trend, driven by a strong fear of missing out (FOMO), is at its highest levels since December 2024, causing investors to overlook risks like uncertainties in valuations, trade market, and the slowing labor market.

AI gains on optimism: Some 40% of clients surveyed expect the S&P 500 Index to outpace global peers in October, putting the bullish sentiment at its highest level since December 2024. The heavy-tech index closed on a record high 27 times from June to 3 October, primarily due to AI bullishness, according to Bloomberg’s data.

Going strong: Goldman Sachs clients indicated they plan to double down on their investments in the so-called “Magnificent Seven” tech companies like Amazon and Microsoft. Over 50% of people surveyed are eyeing AI infrastructure stocks, with the majority expecting momentum to outplay the S&P 500 by year-end.

BUT- Is the AI bubble about to burst? We’re seeing more signs of peak bubble status, including massive capital expenditure by major tech companies and US stock market concentration, Ian Harnett says in the Financial Times. Staggering stock prices, as well as companies sealing agreements with each other and purchasing one another’s products, are also among signs of a bubble burst, Harnett argued.

Others concur: “While almost all indicators point up, this setup also increases the probability of rapid unwinds down the road. Buyers beware,” Oscar Ostlund, global head of content strategy, market analytics and data science for Goldman’s digital platform Marquee told Bloomberg.

History repeats itself: The pattern mirrors historical tech revolutions, most notably the TMT (dot-com) bubble of the late 1990s, which also saw a boom in infrastructure spending before it reached its endgame, Harnett added. Tech bubbles tend to burst not because the technology itself fails, but due to external pressures like regulation, competition, or slowing customer demand, he said.

The long-term scene could be more nuanced. A burst, while painful for late-stage investors, is often a necessary part of the innovation cycle, Harnett argues. The “creative destruction” inherent to bubbles ends up giving access to new technologies at lower prices, leading to the technology being embedded in society, he added.

MARKETS THIS MORNING-

Asian markets are mostly in the green this morning. Japan’s Nikkei is leading the gains with a 4.5% rise in early trading, following a record high yesterday after pro-stimulus Sanae Takaichi was picked to head the ruling Liberal Democratic Party — and possibly become Japan’s first female prime minister. Meanwhile, Wall Street futures are little changed as the US government shutdown drags on.

ADX

10,073

+0.1% (YTD: +6.9%)

DFM

5,918

+0.0% (YTD: +14.7%)

Nasdaq Dubai UAE20

4,821

-0.1% (YTD: +15.8%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

4.0% o/n

3.9% 1 yr

TASI

11,529

+0.3% (YTD: -4.2%)

EGX30

37,211

+0.8% (YTD: +25.1%)

S&P 500

6,716

0.0% (YTD: +14.2%)

FTSE 100

9,491

+0.7% (YTD: +16.1%)

Euro Stoxx 50

5,652

+0.1% (YTD: +15.4%)

Brent crude

USD 65.39

+1.3%

Natural gas (Nymex)

USD 3.32

-3.4%

Gold

USD 3,909

+1.1%

BTC

USD 122,878

+0.4% (YTD: +31.5%)

Chimera JP Morgan UAE Bond UCITS ETF

AED 3.72

+0.3% (YTD: +6.8%)

S&P MENA bond & sukuk

150.83

0.0% (YTD: +7.8%)

VIX (Volatility Index)

16.65

+0.1% (YTD: -4.0%)

THE CLOSING BELL-

The DFM remained flat on Friday on turnover of AED 338.4 mn. The index is up 14.7% YTD.

In the green: Taaleem Holdings (+7.1%), National International Holding Company (+4.3%) and Amanat Holdings (+2.7%).

In the red: National General Ins. Company (-3.2%), Chimera S&P UAE UCITS ETF — Share Class A — Accumulating (-2.6%) and ENBD REIT (-2.4%).

Over on the ADX, the index rose 0.1% on turnover of AED 812.3 mn. Meanwhile, Nasdaq Dubai was down 0.1%.

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