Worried About an AI Bubble? Watch This Indicator
Tom Essaye says chip stocks may be the canary in the coal mine
Stocks Are Hitting New Highs and Investors Don’t Believe It
While artificial intelligence remains the dominant market narrative, Sevens Report President Tom Essaye warns that investors should be cautious about hype outpacing reality.
“Every bubble in modern market history has been based on a narrative,” Essaye wrote, comparing today’s AI surge to past booms like the dot-com and housing bubbles. He suggests that the best early warning signs may come from semiconductor stocks—especially the broader Philadelphia Semiconductor Index (SOX).
Nvidia may be hitting record highs, but Essaye cautions that focusing solely on NVDA could be misleading. “That divergence in index performance is meaningful,” he said. If SOX begins to materially sell off, he warns, “the S&P 500 will almost certainly not be far behind.”
Although he stops short of calling the top, Essaye believes equity markets are underpricing the risks. “There is a significant sense of complacency in equity markets right now,” he wrote, urging investors to stay alert in the second half of 2025.
Also, click here to view the full article featured on Barron’s published on August 1st, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.
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