Despite Arnott's warning, the market's enthusiasm for AI stocks continues unabated. This situation serves as a lesson on the dangers of skepticism on Wall Street when everyone else is buying. The article suggests that the current market conditions are discouraging traders from short selling or betting against AI stocks, even when there are signs of overvaluation.
Key takeaways:
- Wall Street traders are hesitant to challenge the AI rally, with short sellers notably absent despite the rapid rise of Big Tech.
- Hedge funds and retail traders are increasing their exposure to AI companies.
- Rob Arnott, founder of Research Affiliates, warned five months ago that Nvidia Corp. had become a bubble due to extreme valuations after the shares quadrupled in just a year.
- Arnott's warning serves as a lesson on the risks of skepticism on Wall Street when the majority are buyers.