We are in the 'advanced stages' of an AI bubble, says Rockefeller's Ruchir Sharma

Core Viewpoint - The current market is in the advanced stages of a bubble, characterized by overvaluation, overownership, overinvestment, and overleverage, particularly in the tech sector [2][5]. Overvaluation - Historical data indicates that major bubbles typically see prices rise tenfold over a 10 to 15-year period, which aligns with the performance of the US tech sector in recent years [2]. - Current valuations in the tech sector are in the 95th percentile across most metrics, with only the year 2000 showing comparable levels [2]. Overownership - Americans currently hold 52% of their financial wealth in the stock market, surpassing levels seen in 2000, and indicating a significant shift in wealth allocation compared to property [3]. Overinvestment - Tech investment as a share of GDP has reached 6%, which is higher than the levels recorded in 2000, suggesting a substantial increase in capital directed towards technology [4]. Overleverage - While there has been an increase in AI-related debt, households and the private sector are not as leveraged compared to previous cycles, with the government being the primary source of increased leverage [4][5]. Market Performance - Major tech companies like Meta, Amazon, and Microsoft have seen stock price increases of 9%, 2%, and 12% respectively this year, but all underperform the S&P 500 [6]. - The decline in free cash flow growth for these companies is contributing to their current stock performance issues [8]. Global Market Comparison - Despite significant investment in AI, US stock markets have underperformed compared to global markets, marking the widest performance gap since 2009 [8][9]. Interest Rates as a Catalyst - Historically, rising interest rates have been the primary catalyst for ending market bubbles, indicating that any tightening in financial conditions could trigger a market correction [9][10].