Two of Wall Street’s most seasoned voices – 95-year-old investing legend Warren Buffett and 88-year-old economist Gary Shilling – have both issued stark warnings about the current state of the US equity market.
Speaking at the May 2 shareholder meeting of Berkshire Hathaway in an interview with CNBC, Buffett remarked that speculative behavior has become excessively rampant, describing today’s market as dominated by a “gambling” mentality unlike anything he has previously witnessed among investors.
Meanwhile, in an interview with Business Insider, Shilling stated bluntly that a US recession is unavoidable. He also pointed to overstretched valuations in the S&P 500, warning of a potential correction of as much as 30 percent.
Recent economic data appear to reinforce these concerns. US first-quarter GDP growth came in at just 2 percent year on year, below market expectations, while core personal consumption expenditures inflation rose 3.2 percent year on year in March – suggesting that inflationary pressures are reaccelerating.
More troublingly, within the S&P 500 – aside from a handful of mega-cap technology firms such as Microsoft, Amazon, and Google continuing to aggressively expand AI-related capital expenditures – the majority of constituent companies are projecting only single-digit growth in capex. This divergence suggests that most corporations remain cautious about the economic outlook, even as investment becomes increasingly concentrated in artificial intelligence.
Such a trend raises a broader structural concern: the US economy is becoming overly reliant on AI-driven investment. Should the AI narrative falter, recession risks could materialize rapidly. Notably, even reports that OpenAI may be underperforming in terms of operating revenue – and facing uncertainty over a potential US listing this year – have largely been ignored by investors, underscoring the market’s continued complacency.
The influence of AI extends well beyond the United States. In South Korea, the equity market continues to hit record highs, largely driven by the heavy weighting of SK Hynix and Samsung, which together account for more than 40 percent of the market. The concentration is even more pronounced in Taiwan, where TSMC alone comprises over 44 percent of the benchmark index. In such environments, any disruption to the AI theme could trigger sharp declines in these key stocks, potentially leading to severe market corrections and broader economic fallout in both regions.
In essence, global financial markets appear to be engaged in what Buffett aptly described as a “gamble” – a collective bet that the AI narrative will not unravel. Yet with mounting evidence suggesting that AI-generated revenues may still fall short of justifying the scale of capital investment, the question remains: is this still a bet worth taking?
Andrew Wong is a veteran independent commentator
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