For months, I’ve watched with growing unease as the market piled into AI stocks with a fervour not seen since the dot-com era. Nvidia, Microsoft, and a dozen unprofitable startups have been valued as though they’ve already conquered the world. But the cracks are starting to show.
Last week’s sudden 8% drop in the tech-heavy Nasdaq was dismissed as a ‘profit-taking blip.’ I call it a warning shot. The fundamentals don’t add up.
Revenue growth is real for some, but the multiples are pricing in a decade of uninterrupted miracles. Meanwhile, the Bank of England’s cautious hold on rates and sticky core inflation mean the era of cheap money is over. When the cost of capital rises, speculative froth evaporates first.
The AI narrative is powerful, but markets have a cruel habit of re-rating dreams into reality. If you’re sitting on triple-digit gains from a stock that doesn’t yet turn a profit, ask yourself: who’s the greater fool?
