Has AI Become Too Smart for Its Own Good?Why top institutions are warning that markets could be heading for a reality check.
- Iftekhar Khan
- Oct 12
- 3 min read
The Robots Are Printing Money… For Now
Artificial intelligence has become the market’s favourite magic trick. Every headline screams “AI will revolutionise everything!” — and every stock even remotely connected to it seems to double before lunch.
But behind the euphoria, a quieter conversation is taking place. The Bank of England, Goldman Sachs, and JPMorgan have all issued cautionary notes suggesting that markets could be skating on thin silicon ice. The reason? Valuations are starting to look, well… a bit too intelligent.
Why the Big Players Are Nervous
1. Valuations Have Left Earth’s Orbit
When the Bank of England calls equity valuations “stretched,” especially in AI-linked tech, it’s not just noise. We’re seeing P/E ratios that would make 1999 blush — Nvidia’s valuation alone implies infinite chip demand and eternal growth.
2. The Market’s Leadership Is Alarmingly Narrow
The “Magnificent Seven” — Apple, Microsoft, Nvidia, Amazon, Meta, Alphabet, and Tesla — carry most of the S&P’s weight. If one of them stumbles, it’s not just a tech wobble — it’s a market migraine.
3. The ROI Problem
MIT data shows 95% of companies using generative AI aren’t seeing measurable returns. Translation? Investors are paying for potential, not profit.
4. The Circular Money Loop
AI firms are investing in chipmakers who invest right back. It’s less organic growth, more “pass the parcel” with billion-dollar price tags.
5. The Macro Reality Check
Inflation’s sticky, rates are high, and liquidity’s tight. Even JPMorgan’s Jamie Dimon warned there’s a 30% chance of a correction.
Are We in a Bubble? Not Exactly — But It Smells Familiar
The Apollo Global economist says this might be “more extreme than 1999. ”Today’s firms make real profits — but investors are pricing them as if they’ll triple forever.
The Bull Case: This Time Might Be Different
AI could genuinely transform productivity and justify the optimism. The big names have cash-rich balance sheets and real revenue streams — they’re not Pets.com. Still… every bubble starts with that same line.
What Could Trigger a Pullback
Earnings disappointments from Nvidia, Meta, or Microsoft
Slower AI capex
Regulatory pushback
Technological bottlenecks
Shifts in sentiment
Like a Jenga tower — all it takes is one wobbly quarter.
What Traders Should Watch
Earnings Season: Late Oct–mid Nov 2025
U.S. CPI (16 Oct, 13:30 BST): Hotter print = pressure
Fed Meeting (5 Nov): Any hawkish tone = risk-off
Market Breadth: If fewer stocks drive gains, correction risk rises
Trading Takeaway
At CLiK, we remind students: the chart tells the truth before the news does. If AI stocks start losing momentum, price structure will show it. Watch volume, volatility, and the psychology — not just the headlines.
Conclusion: Intelligence Meets Valuation Gravity
AI will change the world. But in the short term, what’s changing fastest is the price tag. As Goldman Sachs notes: the AI spending boom has limits. When the market forgets that, the correction reminds it.
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