A Possible AI "Blow Off Top" Coming? What of it?

One of our trusted resources - a/k/a one of our "Brain Trust" folks - wrote a screed about AI lately. Indeed, AI has been a theme for a long time now. But it seems AI may be headed for a blow-off top in the stock market now. The comparison to the tech blow-off top has been the key reference to understand what may be churning right now in the stock market.

If you're not already getting tired - perhaps sick - of the constant chatter about AI, here a few thoughts. After all, the accepted wisdom has been that AI has been the fuel behind the market's buoyancy lately. And, make no mistake, buoyancy captures what's going on with the major stock averages as opposed to yet another push to the stars - at least so far.

The buoyancy has kept stocks bobbing for air after being submerged for a spell. The submerging actually had some chatterboxes in the financial media wondering what the heck was going on. After all, aren't we in a historic Bull Market? Aren't stocks destined to continue to rise in tandem with a strong economy? 

(That "strong economy" we keep being hit over the head with may or may not exist - but never mind.)

Now, if you're one who sees the world through the lens of the stock market or the chatter of economists, your world may very well seem to be a shining city on a hill, or some such image. All is good.

Then again, if you're one who sees the world through the lens of the protestors infecting cities throughout our country, indeed much of the world, then your world likely seems like it needs the likes of you to straighten itself out - or something like that.

But we were talking about AI and a possible blow-off top.

If you check a chart of Nividia (NVDA), the more prominent of AI-related companies, you see it had a dramatic rise and is now consolidating. Will it explode up soon? If so, a blow-off top may be our future.

Then again, if you check AIQ - an ETF of AI-related stocks - it rose from November to February - just when NVDA began its most recent big move up. But as NVDA jumped, the conglomeration of other companies mostly churned. Now all are flattish, consolidating.

What's it all mean? Who knows? Our Brain Trust votes for a blow-off top. That means we'll see prices of NVDA climb to the moon - and very soon. As for the ETF, it should follow suit, more of less.

The comparison to the Tech blow off, if appropriate, shows that the blow-off top that culminated in early 2000 led to a slow strangulation of the stock prices of all the "real companies" (those who had real businesses that were bid up because of their connection to the tech industry) and a collapse of those companies who never had any earnings and were bid up because that's what happens in manias.

So if you're seeking some drama to perk up an otherwise dowdy existence, maybe this is the area to hold your attention for the coming months.

As for investing in any of this, it's the very definition of speculation. Have at it if it's your style.

As for AI - apart from the prices of stocks - it's purported to be the savior of our economy (But aren't they saying the economy is strong?) or the end of the world of humans. Take your pick.

Or you could simply watch the show and keep your head screwed on tight.

If the latter, then the bigger story will be the current protests against the Israeli government and its army as they continue to wreck Gaza. And if your head really is screwed on tight, you'll realize that all the protests are something like "George Floyd" revisited. That is, these are likely well-funded events, with many participants paid actors. The cause of the day happens to be the Israeli-Hamas-and whoever else war. The objective is social disruption. To what end? 

Ah, that's a subject for another day. 

For now, let's recall that we may very well be in a decade or so of social upheaval, somewhat similar to what we saw in the 1960s-1970s. Be prepared.