US market analysts warn of AI bubble and dollar volatility

Economic analysts are warning of potential shifts in the US market, specifically regarding the artificial intelligence sector and the strength of the US dollar.

Bill Dudley, former president of the Federal Reserve Bank of New York, suggests an AI investment bubble could burst by the end of 2027. He cites several risk factors, including a projected slowdown in AI investment due to shortages in energy, chips, and labor, as well as concerns over whether tech giants can generate sufficient revenue to justify approximately $5 trillion in capital expenditures. Additionally, increased market supply from IPOs and insider selling could further depress stock prices.

Simultaneously, a weakening US dollar may drive structural gains in specific assets, most notably gold. Analysts note that US Treasury interventions to manage long-term yields could undermine the dollar's role as a global reserve currency. Ray Dalio of Bridgewater Associates has recommended allocating up to 15% of portfolios to gold to hedge against potential US debt crises. UBS Global Wealth Management has projected gold could reach $5,400 within the next twelve months amid rising sovereign debt uncertainty.