The AI Rally May Be The New Dot-Com Bubble (SP500)

Summary

• The US stock market, driven by AI giants like Nvidia (NVDA), is showing signs of extreme overvaluation reminiscent of past asset bubbles.
• Valuation metrics such as Buffett’s indicator and the Shiller P/E ratio are at historic highs, fueled by the dominance of the 'Magnificent 7' tech stocks.
• Historical parallels to Tulipmania, the South Sea bubble, and the dot-com crash suggest the current AI-driven rally could end in a significant correction.
• Investors should be cautious, as Fed liquidity may eventually end despite the current easing cycle; holding cash could provide better opportunities after a potential market downturn.

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