As AI-driven stocks dominate, red flags are raised.

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As the stock market rally continues, a concerning trend emerges, signaling potential fragility in the current landscape. Semiconductors, often regarded as the heartbeat of the tech sector, are now the most overbought since March 2000, prompting questions about the sustainability of the rally. What’s even more striking is the perception that the stock market surge has become entirely driven by artificial intelligence (AI).

Companies not related to AI seem to be left out of this rally, highlighting a potential imbalance in market dynamics. Notably, a shift in Fed expectations, which removed two interest rate cuts from futures, failed to impact AI stocks. Key tech giants like Apple ($AAPL), Google ($GOOGL), and Tesla ($TSLA) are all down over 3% today and more than 5% year-to-date, underscoring the market’s reliance on AI-driven stocks.

The once-“Magnificent 7” tech stocks are dwindling, with Nvidia ($NVDA) now surpassing Saudi Aramco in market value, making it the world’s third-most valuable public company after Apple and Microsoft. Super Micro’s meteoric rise, set to be added to the S&P 500, further accentuates the dominance of AI-related firms, marking it as the unofficial best-performing S&P stock of 2024 with a staggering 200% year-to-date gain.

The unsettling question of a potential bubble looms large, evidenced by Goldman Sachs removing $AAPL from its conviction list. Additionally, $TSLA’s China shipments hitting their lowest level in over a year raises eyebrows, signaling potential cracks in the narrative that once overlooked such concerns.

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In a market where AI reigns supreme, signs of strain and potential overvaluation are emerging, raising concerns about the sustainability of the current rally.

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