AI Bubble Fears Grow as Chip Stocks Diverge From Broader Market
Sevens Report urges caution as SOX index lags S&P 500 gains
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Sevens Report Research warned Friday that a growing disconnect between AI chip stocks and the broader equity market could be an early signal of an “AI bubble.”
“Every bubble in modern market history has been based on a narrative,” the firm wrote, calling AI technology the latest potentially bubble-inflating theme.
While Nvidia often draws attention as the face of the AI rally, Sevens cautioned that single-stock enthusiasm—especially driven by a “cult following”—can obscure broader market signals.
“It would be much more prudent to keep tabs on the broader-based semiconductor index, SOX,” the report said. Despite strong gains in the S&P 500 since July 2024, SOX has failed to post a new high, raising red flags.
“If AI remains the primary source of bullish optimism… this market is in trouble and at risk of rolling over sooner than later,” the report concluded, likening the broader market to Wile E. Coyote running off a cliff.
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