Analyst Dismisses Sustainability of FOMO-Fueled Bull Run in AI Market

Recent research by Main Street Research warned that the hunger demonstrated by retailers and institutions is fuelled by the fear of missing out (FOMO), which is likely unsustainable in the long term. The company’s chief investment officer (CIO), James Demmert, considers the intoxicating effects of attracting retailers and institutional investors to the artificial intelligence (AI) stock to be short-lived.

The research analysts observe that investors who ditched the crypto market citing FOMO and fear, uncertainty and doubt (FUD) would likely soon rethink their investment decisions. Demmert considers that such would be the decision, notably if they shifted towards embracing artificial intelligence.

FOMO Fuelling the Stock Market Surge Riding the AI Hype

The investment firm admits that FOMO largely fuels the sizzling stock market surge leveraging the AI hype. The trend will only last for a while. Demmert considers that the race to acquire AI stocks is merely a temporary phenomenon that portrays one advanced by irrational exuberance. 

Demmert considers the accelerated uptake of AI stocks as needing more fundamental reasoning. Instead, the market strength observed recently within the retail and institutional investors shows adrenaline-pumping hunger.  

The CIO, Demmert, admitted that market analysis shows the uptrend witnessed within the stock indexes is unsustainable. He informed Markets Insider that the likelihood of mixed earnings reports and anticipated Fed rate hike would quickly strangle the AI-fuelled hype. 

Demmert highlighted that the experience of unusually placid markets shows the FOMO-led euphoria is short-lived. The analysis observed that investors are engulfed by bullishness attributed to the revelation that the volatility gauge hovers within the record lows. 

Demmert suggests that investors should exercise wisdom and patience to avoid chasing stocks at high levels. Doing so would allow the investors to leverage the corrections as it is the ideal buying opportunity.

Sustained Hawkish Stance by Fed to Unsettle Investors Embracing AI-Affiliated Stocks

Market corrections involve instances when the asset pricing adjusts the trend temporarily. Corrections arise when the bulls or bears cannot sustain the price momentum. The analysts ruled that the corrections imply that the stock sustainably changes the trend. On the contrary, it arises when traders seek to profit from the subsequent correction.

Demmert considers the upcoming Fed’s meeting scheduled on July 26-27 could dampen the ongoing party. The market analysts project the Fed would sustain its hawkish stance by adding another 25 basis points to the current interest rates. Doing so would raise the Fed funds rate to 5.25 to 5.50%, the highest since 2001 levels.

The announcement of hawkish policies by the Fed could disrupt investors. This comes at a time when policymakers seek to calm the excessive excitement that hinders the accomplishment of tighter financial conditions. 

Demmert believes that tech titans will issue their earnings report this week. Doing so would unsettle the AI sector. Such is possible given that most tech firms earlier had cautious outlooks. Its confirmation could weaken the AI sector. The analyst predicts that though AI-related stocks hurriedly left the station, a retreat to normal levels is inevitable to allow for better entry levels. 

Demmert’s cautious call echoes the skepticism demonstrated by Stability AI chief executive Emad Mostaque. The AI chief executive warned that the hype to acquire AI-affiliated stock reincarnates the dot AI bubble that now surpasses the dot.com bubble of the 90s. 

Mostaque projects the AI-fuelled hunger to cause the largest bubble. Although long-term opportunity is assured for AI firms, generative tools such as ChatGPT illustrate that excessive hype often inflates the stocks beyond reason. 

Dazzling Numbers of AI Contribution Causing the Irrational Uptake of AI-Affiliated Stock

Mostaque referenced the opposing views, with some promoters considering AI as a significant invention since fire discovery. Others consider it posing threats to disrupt the social order and leave humankind extinct. 

The resulting tug of war shows that the safe integration of mission-critical systems would take longer to realize. Although Mostaque and Demmert observe that exuberance exceeds reasoning, AI’s impact is dramatic. 

The recent analysis predicts generative AI playing a critical role that would yield a $4.4 trillion annual injection into the economy. Further, they project the AI industry to realize a $15.7 trillion value in seven years. The numbers would likely dazzle the investors’ eyes resulting in some irrationality. 

Demmert decried that irrationality hardly ends well within the markets. Instead, investors should heed the warnings issued by sober analysts and backed by industry experts’ studies to ride out the ongoing dot AI wave. He revealed that only a section of the train left the station.  

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