Charles Schwab Liz Ann Sonders, chief investment strategist at Charles Schwab, recently stated that regarding artificial intelligence... The AI boom is not the dot-com bubble 2.0, but it could still disappoint investors and send shockwaves through markets and the economy.
In a recent interview, Sonders stated that the “extreme enthusiasm” for the cyclical transactions between innovation and technology companies reminded her of the dot-com bubble 25 years ago. However, she also pointed out a key difference: many internet companies were small and unprofitable, while today’s AI leaders are large companies with strong balance sheets and rapidly growing revenues and profits.
For example, Nvidia Last week, it became the first company to reach a market capitalization of $5 trillion. The chip giant reported revenue of $47 billion and net income of $26 billion in the quarter ending July 27, providing some support for its valuation.
Sonders stated that investors' wealth is heavily concentrated in large technology companies, meaning "exposure to the stock market is greater than ever before." She added that if the bear market holds firm, "it could have an impact on the economy," as consumers may withdraw due to portfolio losses and cut spending, thus dampening economic growth.
This Wall Street veteran said that artificial intelligence companies may not be able to meet their optimistic growth forecasts, which are precisely the optimistic forecasts that have driven the stock market to record highs.
“This is the ultimate risk—you’ve set your expectations too high,” she added. “In this situation, even a minor misstep could trigger ‘more shocking’ market behavior.”
Sonders also added that in meme stocks, drones Speculation in niche areas like quantum computing makes her "not so uneasy" about investor frenzy, because "you can have cracks in your armor" but it won't drag down the overall stock market.
She also stated that the surge in gold prices to record highs above $4,000 this month is an area where "the pendulum of enthusiasm has swung a little too far," and that these fluctuations are "more driven by FOMO (fear of missing out) than by fundamentals."
On the other hand, Sonders said that it is now difficult to measure the health of the U.S. economy because the government shutdown has disrupted the release of some data: "We are all a bit blind right now." But she said that economic indicators in recent months show that low-income consumers are facing increasing pressure and the labor market is softening, which could weaken economic growth.
“This is not a declaration that a recession is imminent, but investors should pay attention to the weakening employment situation,” she added.
(Article source: CLS)
