AI Mania Is Worse Than 1999 Tech Bubble, Economist Warns

A leading Wall Street economist is warning that the current surge in artificial intelligence stocks may be even more overblown than the dot-com bubble of the late 1990s, Francisco Velasquez reported for Yahoo Finance.

Sløk’s concerns echo a growing sense of unease on Wall Street about the sustainability of recent market gains, many of which are driven by AI euphoria and momentum trades.

“AI will do incredible things for all of us,” said Torsten Sløk, chief economist at Apollo Global Management, on Yahoo Finance’s Opening Bid.

 “But does that mean I should be buying tech companies at any valuation? Increasingly, the answer is no.”

In a research note this week, Sløk pointed to internal data showing that the price-to-earnings (P/E) ratios of the 10 largest companies in the S&P 500—many of them major AI players like Meta and Nvidia—have surpassed the levels seen at the peak of the 1999 tech bubble.

That indicates a dangerous concentration of investor exposure in just a handful of tech giants, Sløk warned.

“Almost 40% of the S&P 500 is now made up of the 10 largest companies,” he noted.

“So, if I invest $100 in the S&P 500, I think I’m getting diversified exposure to 500 companies. In reality, I’m mostly betting on Nvidia and the broader AI story continuing.”

Sløk’s concerns echo a growing sense of unease on Wall Street about the sustainability of recent market gains, many of which are driven by AI euphoria and momentum trades.

Analysts at BTIG issued a similar warning this week, describing the market as “frothy” and cautioning that a near-term pullback in overvalued AI stocks could be on the horizon.