Artificial exuberance

America's stock market, unconcerned by trade tensions or fiscal strain, sits near a record high.

- IRRATIONAL CHOICE DEBASHIS BASU

The exuberance is driven by a new generation of technooptimism -this time about artificial intelligence (AI). The "Magnificent Seven" (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) now account for roughly 38 per cent of S&P 500's market capitalisation and about half its profits. Their dominance, and the feverish faith in a new technology revolution, evokes memories of the late 1990s dotcom mania. S&P's cyclically adjusted price-earnings ratio has breached 40 for the first time since 2000, when it reached 44 - shortly before the benchmark plunged by nearly half, as the internet bubble burst. Then, as now, the conviction that a digital revolution would rewrite the rules justified almost any valuation. Then, as now, the danger is that when the music stops, the fall will be sudden, faster, and deeper than anyone expects.