Record investments in tech stocks have been propelled by a 'baby bubble' in AI, despite warnings of potential overbought conditions from Bank of America strategist Michael Hartnett.
The success is tangible, too. The Nasdaq 100 Index is now at a record high compared to the Russell 2000 small-cap index. As a result, Hartnett believes there might be a contrarian trade brewing. The strategy? Sell AI and buy Hong Kong shares.
It's no surprise, then, that tech stocks are surging. They've grown by 32% this year, thanks to bets that the Federal Reserve will halt rate hikes and that the sector will be relatively unaffected by any future recession. A "baby bubble" in the context of investments refers to a surge in investment activity centered around a specific industry or technology that is rapidly growing, in this case, artificial intelligence . It's called a "baby bubble" because while the influx of investments might inflate the perceived value of the sector, much like a bubble, it's still in its early stages or "baby" phase.
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