How artificial intelligence is driving markets higher and why investor fear may be the real fuel behind the surge
By Dave Deruytter
Artificial Intelligence is propelling global stock markets to new heights and FOMO (Fear of Missing Out) seems to be guiding investors’ decisions.
Breakthrough technologies have always driven markets upward, often creating new blue-chip companies whose valuations soar exponentially. Other innovative firms join the wave, posting impressive financial results, while less adaptive ones fade or disappear.
Yet history reminds us that new technologies often follow a “boom and bust” pattern. Hype exceeds reality, expectations outpace results, and eventually markets correct, sometimes dramatically. The dot-com bubble of 2000 remains a classic example.
Could this be happening again with AI?
Riding the AI Wave
Valuations of tech giants such as NVIDIA and Microsoft are soaring, with price-to-earnings ratios that seem detached from traditional fundamentals. Investors wonder: What if I sell too early and miss more upside?
Alternatives look unappealing: bonds remain weak amid lingering inflation and high tariffs, crypto remains speculative, and gold’s long-term value is debatable. Savings accounts can’t even match inflation.
But what if AI truly delivers on its promises?
Consider Google Gemini, which already enhances search results through advanced AI analysis. While general Large Language Models (LLMs) like ChatGPT or Gemini dominate headlines, Small Language Models (SLMs); built on a company’s private data could become even more valuable. Ensuring clean, compliant data within corporate “data lakes” is crucial, keeping data scientists and compliance officers in high demand.
It’s this mix of potential, profit, and promise that keeps fueling the boom.
The Dream and the Danger
Investors are captivated by visions of AI-driven efficiency; machines replacing costly human labour, robots powered by smart algorithms, and fully automated factories.
Are these realistic scenarios or just seductive dreams?
Either way, they continue to drive markets higher, creating a “sky is the limit” mentality that may persist for months or years.
Still, geopolitical instability looms large. Conflicts across the globe remain unresolved, and escalating tensions pose significant market risks. Meanwhile, governments and individuals face record levels of debt.
On top of that, the social impact of AI cannot be ignored. If automation replaces millions of jobs, what will societies do with displaced workers? Population decline alone will not offset job losses. Ethical questions also remain unanswered:
- What is true, and what is fake?
- How far should we let AI decide?
The Blade Runner analogy feels less fictional every year.
Guiding the Ghost
AI, like nuclear power or dynamite, can be both revolutionary and dangerous. Fear should not halt progress, but thoughtful regulation and responsible innovation are essential to prevent misuse.
The “AI ghost” is out of the bottle and it won’t go back in. The task now is to guide it wisely.
Despite uncertainty, AI continues to drive markets higher. FOMO, weak bond yields, and limited alternatives keep investors committed to equities. Nobody wants to miss the next golden opportunity.
Still, the future remains uncertain. Investors should stay true to their risk profile and time horizon, avoid leverage, and remember:
Greed is not a good guide.
Health, yours and your loved ones’ matters more than any financial return.
