People are chasing AI stocks like 'dogs chase cars' — and a crash looks certain, veteran investor Bill Smead says

Core Insights - The AI sector is perceived as a "bubble" driven by the momentum of soaring stock prices, particularly Nvidia, which has seen its shares increase 12-fold since the beginning of 2023, leading to a market valuation of $4.4 trillion [1] - Palantir's stock has also surged 28-fold during the same period, valuing the company at approximately $420 billion [2] - Concerns are raised about the overcapitalization of AI companies, with examples like CoreWeave, which reported $1.2 billion in revenue but has a market value of $60 billion, indicating a disconnect between revenue and valuation [2][3] Market Comparisons - The current market environment is likened to the late 1990s before the dot-com bubble burst, suggesting that the situation is reminiscent of past major market manias [3] - The rapid stock price movements, such as Oracle's 40% increase in a single day, highlight the volatility and potential for significant declines in the AI sector [4][8] Investment Concerns - There is a worry about the close relationships among major AI companies, exemplified by Nvidia's commitment to invest up to $100 billion in OpenAI [9] - The potential financial fallout from a decline in Big Tech stocks could have broader implications for the economy, particularly in high-end real estate markets [10] - The investment strategy of avoiding tech stocks in favor of sectors like energy, homebuilding, healthcare, retail, and REITs is emphasized as a prudent approach [10][11]