AI Stock Surge Sparks FOMO Warnings from Market Experts

AI stocks are soaring—and market veterans are sounding the alarm. The fear of missing out is driving valuations into uncharted territory, leaving seasoned analysts uneasy.

The FOMO Frenzy

Retail and institutional money is flooding in, chasing the next big narrative. It’s a classic momentum play, but the fundamentals are struggling to keep pace with the hype. Every dip gets bought, every rally gets extended—until it doesn’t.

Expert Nerves Are Showing

Whispers of ‘irrational exuberance’ are getting louder. The smart money is starting to hedge, questioning whether this is sustainable growth or just another bubble inflated by cheap narratives and cheaper sentiment. Remember when ‘blockchain’ was a stock-market magic word? This feels familiar.

The Cynical Take

Here’s the finance jab: nothing makes a banker believe in the future like a chart that only goes up and to the right. Until it doesn’t. The cycle continues—new technology, new tickers, same old human psychology. Greed has a better marketing team than fear.

So, is this the dawn of a new era or just a brilliantly marketed bubble? The market will decide. But for now, the ride is all that matters—just watch your hands when the music stops.

Strategists see real value despite FOMO behavior

Market analysts have noticed this fear of missing out behavior. Still, they believe genuine value exists in certain AI investments.

Julien Lafargue is chief market strategist at Barclays Private Bank and Wealth Management. He pointed out that the ECB’s review aims to highlight possible threats to financial stability, even when the chances of these threats actually happening are small.

Prices aren’t cheap, he told CNBC, but companies are showing real growth. Lafargue stressed the need to look carefully at different sectors. The real danger? Companies whose stock prices have jumped without producing any actual earnings yet. He specifically mentioned quantum computing companies.

In these situations, investor decisions seem based more on hope than real results, he noted.

While fear of missing out might push some prices higher, others reflect genuine earnings growth. That makes careful selection crucial, Lafargue added.

Turbulent weeks follow Nvidia earnings

The ECB report comes after several turbulent weeks for international stocks. Nvidia’s earnings announcement initially lifted the broader market, which had been under pressure from complex deal structures, debt offerings, and high prices. The technology company’s shares first jumped after the announcement but then quickly reversed course.

Investors can’t agree on whether an AI-driven investment bubble exists. One investor even claims there’s an “everything bubble.” RAY Dalio, who founded Bridgewater Associates, voiced worries. Larry Fink from BlackRock questioned whether massive spending on AI infrastructure is necessary. Cathie Wood from Ark Invest dismissed bubble talk altogether.

The ECB joins other central banks calling for caution. The Bank of England and International Monetary Fund issued similar warnings earlier.

The European central bank stopped short of declaring a bubble but drew comparisons to the dot-com boom and collapse. Current high prices appear supported by unusually strong earnings results, it added.

Luis de Guindos, vice president of the ECB, wrote in the report that market attitudes could change quickly. This could happen if growth expectations worsen or if technology company earnings, particularly those from artificial intelligence firms, don’t meet expectations.

Non-bank financial organizations in the euro area WOULD probably suffer losses under such conditions because of their heavy investments in American companies, he mentioned. Mismatches in liquidity for open-ended investment funds, high borrowing levels among hedge funds, and lack of transparency in private markets could make market stress worse, De Guindos added.

Magnificent 7 dominate but raise concerns

The “Magnificent 7” stocks – Alphabet, Amazon, Apple, Tesla, Meta, Microsoft, and Nvidia – have risen 24% so far this year. As reported by Cryptopolitan. cryptocurrency markets have shown instability, with a major selloff this month hitting Bitcoin and Ethereum particularly hard.

Michael Field is chief equity strategist at Morningstar. He said the ECB makes a valid point. The Magnificent 7 represents 40% of the Morningstar US index. That’s dangerous concentration. All seven companies have significant AI connections, adding another risk layer.

Morningstar sees potential gains in most of these major companies, though. Tesla stands out as more than 50% overvalued, Field stated.

Other AI-linked stocks have stretched valuations too. British favorite ARM Holdings trades at almost 90 times projected 2026 earnings, double Nvidia’s multiple. That’s certainly a risk, he acknowledged.

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