US Stock Market Buries Sector Bubbles under Broader Gains

The US stock market has experienced several rounds of 'mini-bubbles' at the sector level over the past decade, including AI-themed small-cap stocks from 2023-2026 and cryptocurrency concept stocks. The recent AI-related pullbacks are offset by gains in other sectors, but analysts warn that investment in the artificial intelligence sector is reaching dangerous territory. Over the next four years, data center investments are expected to reach $7 trillion, which could cause real economic harm if productivity gains are insufficient.

The frequent bubbles have not caused systemic shock to the broader market due to their localized nature and lack of debt financing. However, the proportion of debt financing in AI investments is rising, making it difficult for the whole market to escape unscathed if the artificial intelligence boom turns out to be a bubble. The root cause of these frequent bubbles lies in a loose monetary environment, speculative psychology, and the pursuit of new technologies.

The phenomenon is attributed to factors such as central bank liquidity, government fiscal expenditure, and margin balances. Zero-commission trading platforms and gamification have further lowered the threshold for stock speculation. While some clean energy investments are seen as necessary costs addressing climate change, large amounts of capital have been wasted on speculative assets.