Investors have been exiting the stock markets for four consecutive days. They are selling continuously and sufficiently to awaken some dormant fears that have existed in international markets for months. The most recent of all is the end of the U.S. government shutdown that ended yesterday. There are still data to be released, especially regarding employment, which raises doubts in the markets, serving as a firm barometer of the American economy. The plunge of Asian markets in the European early hours has not helped either, with the Nikkei losing 3.2%; and the collapse of Bitcoin, which reset to zero for the year after losing $100,000 last week, is not working in favor. But there has been a market rumor brewing for months that has now become a reality in the calculations of the big players who move the markets: a possible artificial intelligence bubble.
Far from being comparable to the 2000 crisis, close to half of the world's largest investment fund managers already consider that the major market risk currently is the potential burst of an artificial intelligence bubble. This level has never been seen before and has multiplied by more than 4 times in just two months, from 10% in September, according to the monthly survey conducted by Bank of America among 172 international managers handling assets valued at nearly half a trillion dollars.
In fact, the majority also believe that there is already a bubble existing. Specifically, 53% of the surveyed managers think so, leading to 6 out of 10 understanding that the stock markets are "overvalued" at the moment. The magnitude of these companies is such that Nvidia's quarterly earnings report, the world's largest listed company with a market capitalization of $4.5 trillion, sets the agenda. The semiconductor giant will reveal its figures this Wednesday (European night) with Wall Street closed. In fact, with nerves on edge, any data below analysts' expectations could trigger declines and the so-called snowball effect in the markets. To give you an idea, as quantified by Reuters, at this moment investors have options contracts (which are complex financial instruments) on 7% of Nvidia's market capitalization that will be executed once their results are known, potentially triggering a wave equivalent to $320 billion just in these shares. This small move is greater than the combined market value of Santander and Inditex.
Their weight is such that they represent almost a third of the composition of the MSCI World Index, the global benchmark index for theoretically diversified investing across all markets. This implies that only the large American tech companies account for 29% of global market capitalization. Nvidia alone represents 6%, Apple nearly 5%, and so on with Microsoft (4.45%) or Amazon (2.8%). Along with Alphabet, there are five U.S. companies with market capitalizations exceeding $2 trillion, surpassing the GDP of the Spanish economy. "Since the launch of ChatGPT [in November 2022], only 41 AI-related stocks explain 75% of the gains in the S&P 500 index," noted DWS.
According to the German asset manager, "the growing interdependence among AI sector companies could become a problem as it is increasingly difficult to identify whether a company acts as a client, strategic partner, investor, or competitor."
JP Morgan's private banking already acknowledged on Tuesday that the money these tech companies will invest in themselves, in business development, will contribute more to the U.S. GDP than American consumption, considering that historically, it has been said that 70% of the economy was supported by American spending. "The large tech companies have tripled their annual capital investment, increasing from $150 billion in 2023 to a forecast of $500 billion or more in 2026, and AI-related investments will contribute more to U.S. GDP growth than consumer spending this year," stated Jacob Manoukian, Director of U.S. Investment Strategy.
As we await the company's financial results controlled by Jensen Huang, global stock markets have accumulated four correction sessions, especially given the declines they are experiencing this Tuesday. The German DAX has incurred losses close to 5% in recent sessions, shedding nearly 1,000 points. The Ibex 35 also falls for the fourth consecutive day, dropping below 16,000 points. In total, since last Thursday, the Spanish index has lost a little over 4%.
Another factor that could be on the table is the possibility of the Federal Reserve lowering rates once again at its December meeting. It is not clear. The lack of data due to the federal government shutdown - now resolved - and persistent inflation could lead the central bank to maintain official rates at 3.75% to 4%.