00:00Investors know the AI boom will stop at some point, but the really big question is when.
00:04That's something we discussed at the MLive event at Bloomberg in London.
00:08AI is powering a massive rally in equities, with countries like Korea seeing their stock indexes
00:14up almost 100% year-to-date. The bull case for AI sees it driving profitability, productivity,
00:20and growth for years to come. At the same time, there are increasing signs of froth in the market.
00:26Parabolic growth means investors are very concerned about speculative positioning,
00:31and the reality that it might be a sharp correction that's coming. But the most immediate concern is
00:36the bond market. US treasuries have risen massively this year, and many investors worry that the next
00:42stop is 5% or higher for 10-year yields. Higher yields increase borrowing costs, they tighten
00:47financial conditions, and they also put pressure on equity valuations. AI is also a big part of that
00:53story. Building the infrastructure needed to support the technology revolution will require
00:57enormous investment, increasing demand for commodities. All that adds to inflationary
01:02pressures that are already above central bank targets, and at a time when the war in Iran is
01:07putting upward pressure on energy prices. Central banks are being forced to hike, putting upward pressure
01:12on yields. Against this backdrop, investors are becoming increasingly constructive on assets linked to
01:17the structural trend, like commodities. For now, AI is supporting equities, but the risk that's evolving
01:23is that the rally is going too far too fast.
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