Yahoo Finance Is the AI-led 'baby bubble' bursting? BofA says tech stocks just saw their biggest outflow in 10 weeks.
Wall Street's excitement for AI could be tiring out, according to Bank of America.
Investors just sold off $2 billion in tech shares, the largest outflow in 10 weeks.
Previously, the bank called AI a "baby bubble," comparing it to the 2000s dot-com craze.
Tech stocks just saw their biggest outflow in 10 weeks – a sign that the "baby bubble" in artificial intelligence stocks could be bursting.
Investors sold off $2 billion in tech shares in the week leading up to June 21, Bank of America investment strategist Michael Hartnett said in a note on Friday.
That could reflect investors' waning interest for artificial intelligence, after mega-cap tech giants boomed in 2023 amid hype over ChatGPT, the buzzy AI bot that can write sophisticated lines of prose.
Tech firms linked to the AI craze saw their stock prices soar, with the "Magnificent 7" – Microsoft, Nvidia, Apple, Alphabet, Meta, Amazon, and Tesla – up 64% from the start of the year, compared to just a 3% increase across the rest of the S&P 500.
Previously, Hartnett compared the excitement for AI to the dot-com bubble, when internet stocks boomed before the Nasdaq Composite plunged 78% in the early 2000s. In a prior note, he called Wall Street's excitement for AI a "baby bubble," and suggested that AI stocks could soon "mature" as internet stocks did in 1999.
Other experts have also warned that investor hype for AI could soon die out. Along with Hartnett, UBS's Art Cashin and veteran economist David Rosenberg have also drawn parallels with the current boom in AI stocks to the dot-com bubble.
Meanwhile, the market overall has greater room for downside than upside, Hartnett said on Friday, predicting that the S&P 500 could potentially gain 100-150 points, but could lose as much as 300 points from now through Labor Day.
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