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Tom Essaye warns the AI-stock index is flashing bubble risk

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The AI trade could be inflating a late-cycle stock market bubble, warns Tom Essaye, founder of Sevens Report Research.

‘This bull market in equities has a serious problem’: Strategist warns a crucial AI-stock index is sending a potential bubble signal

In an August 1 client note, Essaye wrote that “every bubble in modern market history has been based on a narrative”—and today, that narrative is AI. But to measure the health of the AI trade, he points to the PHLX Semiconductor Index (SOX), not just Nvidia.

Semiconductors are the “lifeblood” of AI, yet SOX remains below its July 2024 highs while the S&P 500 has climbed nearly 14% in the same period. That lagging performance, Essaye says, is a meaningful divergence:

“If AI remains the primary source of bullish optimism… this market is in trouble and at risk of rolling over sooner than later.”

He cautions that if SOX begins a material selloff, the S&P 500 likely won’t be far behind.

Adding to the risk: weaker recent payrolls, rising continuing jobless claims, and stretched valuations after an ~85% rally from the October 2022 lows.

“It is critical to keep close tabs on economic data right now,” Essaye stressed in an August 8 note, warning the broader market remains vulnerable to considerable downside if economic resilience falters.

Also, click here to view the full article published in Business Insider on August 9th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Sevens Report warns of early signs of an AI-driven market bubble

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Sevens Report warns of early signs of an AI-driven market bubble

10 AI Stocks Analysts Are Watching Closely

The latest Sevens Report highlights growing concerns that AI-related stocks—especially chipmakers—may be flashing early warning signs of a bubble.

“Every bubble in modern market history has been based on a narrative,” the report states. “That potentially bubble-inflating theme is unquestionably AI technology.”

Much of the enthusiasm has centered around Nvidia (NVDA), but Sevens warns that relying on a single name can be dangerous. “There are a lot of various factors that can impact a single stock, including a ‘cult following’… a dynamic that has appeared to have emerged with NVDA as well.”

Instead, they recommend watching the broader Philadelphia Semiconductor Index (SOX), which includes multiple AI players like AMD, Qualcomm, and others. “It would be much more prudent to keep tabs on the broader-based semiconductor index, SOX,” they wrote.

The SOX hasn’t hit a new high since July 2024, even as the S&P 500 has climbed roughly 13% in that time. Sevens warns that if AI remains the sole driver of optimism, “this market is in trouble and at risk of rolling over sooner than later.”

Also, click here to view the full article published in Insidermonkey.com on August 4th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.