Wall Street bulls bet US stocks rally will defy bubble fears

{"text":[[{"start":9.5,"text":"Wall Street bulls are betting that a rally in US stocks has further to run, shrugging off concerns that huge gains for shares linked to AI are a sign that markets are overheating."}],[{"start":20.4,"text":"The S&P 500 sailed to record closing highs 11 times in May, half of all trading days, leaving the US blue-chip index up about 11 per cent this year. Tech stocks have posted even loftier gains, with the Nasdaq up 16 per cent. "}],[{"start":39.599999999999994,"text":"First-quarter earnings blew past Wall Street expectations, leading big banks including Goldman Sachs and Morgan Stanley to raise their S&P targets for the year in recent weeks. "}],[{"start":49.349999999999994,"text":"Many investors are betting that AI advances and huge investments in chips and data centres will turbocharge US growth and continue boosting companies’ bottom lines. "}],[{"start":60.599999999999994,"text":"“We do not believe that we’re in a bubble . . . A bubble would laugh at the valuations that we’re paying right now,” said Steve Chiavarone, Federated Hermes’ deputy chief investment officer for global equities. "}],[{"start":71.89999999999999,"text":"“Secular bull markets historically are 20-year events,” he added. “We think we’re in the middle, and we think it’s accelerating and this market can continue to go higher.”"}],[{"start":83.05,"text":"Companies at the centre of the AI frenzy have posted eyewatering gains. "}],[{"start":87.75,"text":"The Philadelphia Semiconductor index, which tracks big chipmakers, has soared 81 per cent since the start of the year, leaving it on course for its best run since 1999. "}],[{"start":98.6,"text":"Sandisk, a maker of data centre storage products, has surged 600 per cent so far in 2026, while other companies linked to AI including Micron, Dell Technologies, Intel, Seagate and Western Digital are up 200 per cent. "}],[{"start":113.89999999999999,"text":"Nvidia, the $5tn chip behemoth most closely associated with the AI boom, has gained 13 per cent so far this year."}],[{"start":122.89999999999999,"text":"The rally in AI stocks has helped push measures of market valuations higher. The S&P 500 is trading at about 21 times expected earnings over the next year, above the 30-year average of 17, FactSet data shows. "}],[{"start":null,"text":"

"}],[{"start":137.7,"text":"Rising valuations and the speed of the rally have alarmed some market watchers, with Michael Burry, the investor made famous for his bet against the US housing market ahead of the 2008 financial crisis, warning repeatedly that Wall Street’s AI euphoria resembles the unbridled enthusiasm of the dotcom boom."}],[{"start":156.39999999999998,"text":"Paul Tudor Jones, the billionaire hedge fund manager, in a CNBC interview earlier this month also described the market boom as a “crazy, crazy time”."}],[{"start":165.79999999999998,"text":"“If I had to pick a period, we’ve got another year or two to run . . . if you look at multiples and earnings and everything, we’re kind of where we were in October or November of 1999,” he said. The Nasdaq’s dotcom peak was in March 2000."}],[{"start":180.49999999999997,"text":"But many investors say markets are underpinned by strong corporate fundamentals and expect advances in AI to be only at their early stages."}],[{"start":189.94999999999996,"text":"“Are there pockets of excess? Yes. There is crowding going on. We can get 15-20 per cent correction in individual stocks,” said Mike Wilson, chief US equity strategist at Morgan Stanley, adding: “There will be frothiness and then correction, but the market can keep marching forward.”"}],[{"start":208.74999999999997,"text":"Ben Snider, chief US equity strategist at Goldman, added that “conditions that typically mark the end of bull markets” — such as “speculative mania, contracting profit margins” or Federal Reserve rate rises — are “absent”. "}],[{"start":223.09999999999997,"text":"“And that fuels my expectation that the recent market rally will continue.”"}],[{"start":227.84999999999997,"text":"Some quantitative analysts similarly argue that robust US economic and corporate profit growth suggests stocks have ample room to rise further. "}],[{"start":237.34999999999997,"text":"“There’s a positive risk-reward trade-off in stocks, mainly around the fact that I think earnings growth is much more durable than people think,” said Denise Chisholm, director of quantitative market strategy at Fidelity, adding: “I think that’s the key to what I would call the secular bull market, because it’s the durability of earnings that justifies valuations.”"}],[{"start":257.99999999999994,"text":"Investors are also keenly awaiting a series of massive Wall Street debuts in coming months that will test its appetite to absorb more AI shares. Elon Musk’s AI-to-rockets company unveiled its initial public offering documents last week, while ChatGPT maker OpenAI and Claude developer Anthropic are also expected to go public."}],[{"start":278.1499999999999,"text":"The AI fervour comes at a time when US stocks have overcome a series of hurdles that have prompted brief, sometimes painful, pullbacks before climbing to new highs. The S&P 500 has jumped 57 per cent from a low it hit at the height of the jitters over President Donald Trump’s so-called liberation day tariff announcement in April 2025. "}],[{"start":302.1499999999999,"text":"It has meant that generally, it has been far better to hold stocks through market ructions rather than either selling or betting against them."}],[{"start":310.49999999999994,"text":"“More often than not, you want to buy negative headlines, not sell them,” Chisholm said. "}],[{"start":316.24999999999994,"text":"Additional reporting by Amelia Pollard in New York"}],[{"start":326.84999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780273534_4881.mp3"}