Bank of America sees no signs of an AI market bubble in the US — MarketWatch
Bank of America believes that the rise in US bond yields has not yet reached a level capable of significantly harming the shares of companies linked to artificial intelligence. As MarketWatch reports, the bank's analysts also currently see no signs that the excitement around AI has grown into a market bubble.
Risk assessment
A report by Bank of America's global derivatives research team, led by Benjamin Bowler, states that profit growth among companies in the sector is outpacing increases in their share prices. As a result, the price-to-earnings ratio is declining despite heightened investor interest in artificial intelligence technologies.
Analysts refer to their own bubble-risk indicator, which takes into account an asset's return, volatility, momentum and vulnerability. According to its readings, Bank of America specialists assess the situation with US stock indices relatively calmly and expect stocks to recover quickly after possible corrections.
Comparison with previous periods
Bank of America noted that in the late 1990s, yields on long-term US bonds rose by more than 200 basis points, while the Federal Reserve raised rates by more than 100 basis points, even as the Nasdaq continued to climb. During the dot-com bubble, share prices clearly diverged from fundamental indicators, but the bank believes that such a gap does not yet exist in 2026.
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The maximum decline in the value of 30-year US bonds in 2026 was 7%, compared with 25% in 2022. At the same time, US interest payments are estimated at about 4.1% of GDP, versus nearly 5% in the late 1990s. The bank suggests that the spread of AI and expected productivity growth may help the economy withstand higher debt-servicing costs.
Volatility market
According to Bowler's assessment, volatility markets have not yet shown significant concern over yield movements. Bank of America's global financial stress index, which covers between 20 and 40 indicators of market anxiety across five asset classes, has not recorded a reaction so far.
At the same time, the report warned that future Federal Reserve meetings could increase rate volatility if the monetary tightening demanded by markets does not occur. On Thursday, the yield on 10-year US bonds stood at 4.83%, while Nasdaq futures pointed to a lower market opening.
