We are in a strange financial moment: widespread excitement about artificial intelligence sits beside serious warnings from big institutions, Goldman Sachs, JPMorgan, the IMF, and the Bank of England. Prices have climbed fast. The question is simple: are we paying for real, near-term gains, or for a perfect future that may not arrive?
A single, simple problem is: lots of money has rushed into a very small group of tech companies because investors expect AI to deliver near-perfect, years-long profits, and current prices already assume that perfection. That concentration and those sky-high expectations create fragility.
If adoption is slower than imagined, regulation bites, or profits disappoint, the paper value tied to those firms could tumble fast. When so much of the world’s savings (pensions, funds, ETFs) is tied to that handful of names, a big fall wouldn’t just hurt wealthy traders, it would shave retirement pots, raise borrowing costs, and transmit shocks to economies around the world.
Why The Experts Are Sounding The Alarm
When the IMF, the Bank of England, Goldman Sachs, and JPMorgan all point to risk, it is not idle commentary. These organisations monitor the plumbing of markets, flows of money, leverage, and counterparty risk, so their caution signals that the system might be stretched.
Jamie Dimon of JPMorgan has said he is “far more worried than others” about a crash in the next six to 24 months. That kind of timeframe matters because it suggests risks are near-term, not merely theoretical.
Institutional warnings do two things. First, they tell everyday investors that the usual assumptions (steady growth, smooth adoption of technology) may be optimistic. Second, they encourage policymakers and fund managers to examine how exposed they are. If big players are uneasy, smaller investors often feel the effects quickly.
What Concentration Means, And Why It Is Dangerous
Concentration means a few companies carry a lot of the market’s weight. The five largest US tech firms now have a combined market capitalisation larger than the entire public equity markets of the UK, Japan, India, Canada, and the EURO STOXX 50 combined.
The five giants driving this concentration are NVIDIA, Microsoft, Apple, Amazon, and Google (Alphabet). This scale has never been seen before in modern financial history. Put differently, a tiny group of companies is worth more than whole countries’ stock markets put together.
That matters because indices and ETFs that look diversified can behave as if they are bets on those few firms.
The top ten US stocks, eight of them tech or AI-driven, make up nearly 25% of the world’s total equity value, about US$25 trillion. The Bank of England notes the five biggest S&P 500 firms represent roughly 30% of the index, a 50-year high. When so much value is concentrated, any trouble for a handful of firms hits the whole market.
How Current Prices Assume Decades Of Perfection
Many high valuations today are not bets on next quarter’s performance. They are bets on decades of future profits. Investors use models that discount future cash flows into a single present price. If those future cash flows are delayed, smaller than expected, or if regulatory changes raise costs, the present price falls sharply.
This is easier to grasp with an example. Imagine paying today as if a company will deliver a steady income stream for 20 years. If it only delivers for ten, or the profits are lower, the value you paid is too high. That is the danger when market prices bake in long-term perfection.
Also Read: 40 Careers That Will Vanish Thanks To AI, According To Microsoft
Behavioural drivers
Human behaviour amplifies these risks. Fear of missing out (FOMO) pushes money into the latest story. Kotak Institutional Equities calls some of the moves “anomalies” driven by FOMO rather than by fundamentals. When many investors chase the same story, prices can detach from what companies actually earn.
Jeff Bezos’s line captures the nuance: “AI is real, but we’re in an industrial bubble.” In plain terms, the technology will change things, but not every company hyped as an AI winner will make money. Narratives can take markets far beyond reasonable expectations. When the narrative shifts, those who bought the story first can suffer the worst.
Gold Rising Alongside AI Stocks
A strange thing is happening: gold, a traditional hedge, is rising at the same time AI stocks are surging. The IMF’s Kristalina Georgieva told markets to “buckle up” and flagged gold reaching US$4,000/oz as a sign of deep anxiety. Gold typically moves when investors seek safety. When both gold and speculative tech stocks climb together, it shows a market split between optimism and fear.
That split can make sell-offs worse. If institutions suddenly decide to cut risk, they may sell assets fast. Forced selling, from margin calls or portfolio rebalancing, can drain liquidity. When buyers disappear, even small news can trigger large price falls. In a concentrated market, those falls become systemic.
How A US Correction Would Spread Globally, Including To India
Today’s financial world is interconnected. Global funds, pensions, and ETFs hold US tech-heavy assets. If US tech prices fall sharply, those global portfolios shrink. Investors often respond by pulling money back to perceived safe havens. That can cause capital outflows from emerging markets, tightening financing, and weakening currencies.
For India, a sudden shift in global flows could mean falling equity prices, a weaker rupee, and higher borrowing costs for companies that depend on foreign capital. Firms that borrowed expecting a continued global appetite for risk might face refinancing stress. In short, a US-centric shock can become a global economic headwind quickly.
AI’s potential is real. But potential is not the same as guaranteed profit. Right now, markets look as if they have paid for a near-perfect future. That creates fragility: concentrated valuations, long-term assumptions baked into today’s prices, and a mix of speculative zeal and defensive hedging.
The warnings from institutions, Jamie Dimon’s unease, the Bank of England’s concentration alarm, the IMF’s “buckle up”, are invitations to sober reflection, not panic.
For everyday investors: ask whether you are buying true business improvement or a story. For policymakers: monitor leverage and the channel through which shocks travel to pensions and households.
And for anyone watching the technology, keep a balanced view: AI will matter, but history shows that markets reward patience and punishment for overpaying for certainty.
Images: Google Images
Sources: Finshots, The Economic Times, Mint
Find the blogger: Katyayani Joshi
This post is tagged under: AI gold rush, tech bubble, stock market crash, NVIDIA, Microsoft, Apple, Amazon, Google, investor caution, financial markets, global economy, market concentration, AI hype, dotcom bubble 2.0, Wall Street, IMF warning, Bank of England, Jamie Dimon, gold prices, AI investments, market correction
Disclaimer: We do not hold any right, copyright over any of the images used, these have been taken from Google. In case of credits or removal, the owner may kindly mail us.
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