#market-risk

#market-risk

The concerns around an Artificial Intelligence bubble basically center on whether the massive investments flooding into artificial intelligence can justify their enormous costs and deliver on their transformative promises. Critics worry that the sector is experiencing irrational exuberance reminiscent of the dot-com boom, with tech companies spending hundreds of billions on AI infrastructure, startups commanding sky-high valuations based on potential rather than actual profits, and enterprises rushing to implement AI solutions without clear use cases or a clear return on investment.

The race to dominate artificial intelligence has turned into an expensive competition that traps Big Tech companies into "a little bit of a prisoner's dilemma," a top hedge-fund executive said. "You have to invest in it because your peers are investing in it, and so if you're left behind, you're not going to have the stronger competitive position to it," said Tony Yoseloff, the chief investment officer at hedge fund Davidson Kempner Capital Management, which manages about $37 billion.

Investors expect the Federal Reserve to announce a rate cut of 25 basis points after the two-day FOMC meeting, which ends on Wednesday. Looking ahead, the CME's FedWatch Tool assigns a 95% probability to a further quarter-point cut in December. Traders will be watching closely for any guidance from Fed Chair Jerome Powell over future rate cuts, especially given growing concerns about labour market weakness.

Founded in 1869, Goldman Sachs is the world's second-largest investment bank by revenue and is ranked 55th on the Fortune 500 list of the largest United States corporations by total revenue. The Wall Street white-glove giant offers financing, advisory services, risk distribution, and hedging for the firm's institutional and corporate clients. We review the firm's Conviction List of top stock ideas monthly, seeking companies with the highest dividends and the safest profiles.

Among the major changes that 24/7 host Doug McIntyre has noticed since the AI boom is that companies like Meta, Microsoft, Amazon, and Oracle no longer trade based on the fundamentals of their traditional businesses but instead on their performance in artificial intelligence. He explains that, in the past, investors evaluated these companies by their core divisions - such as Amazon's e-commerce and cloud services or Meta's user engagement and ad revenue - but now AI success dictates their market value.

The AI news cycle of the summer captured themes including the challenge of starting a career, the importance of technology in the China/U.S. trade war, and mounting anxiety about the impact of the technology. But in terms of finance and investing, Deutsche Bank sees markets "on edge" and hoping for a soft landing amid bubble fears. In part, it blames tech CEOs for egging on the market with overpromises, leading to inflated hopes and dreams, many spurred on by tech leaders' overpromises.