The AI craze drove investors to pour a record $8.5 billion into tech funds last week, Bank of America says
There's a risk the tech rally will fizzle out soon, according to Hartnett, with technical analyses suggesting the sector may be overbought.that echoes the excessive valuations of internet-related stocks in the early 2000s before the dot-com crash.
He said in Friday's note that he's still bearish on equities as an asset class, with the Federal Reserve potentially revving up for further interest-rate hikes later this year as it presses ahead with its war on inflation. Stocks tend to fall when rates rise because investors are able to get higher returns by parking their cash in government bonds and savings accounts.
Tech companies' share prices tend to take a particular hit because their valuations are often reliant on borrowing cash — which becomes more expensive when the Fed tightens — and price in their future growth, which might be slower if the wider economy cools. Contrarian-minded investors should sell AI stocks and buy shares in Hong Kong-listed companies, which could benefit from China's efforts to revive its faltering economy, Hartnett said.
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