Bank of America again pulled the alarm that the Seven Sisters of U.S. Stocks rose similarly to the

The continuous fermentation of the AI boom is the driving force for the continuous development of U.S. stocks. In addition to Nvidia, which has not yet announced its financial report, the seven leading technology stocks have handed over brilliant report cards from giants such as Google and Meta, and their stock prices are soaring, supporting them with their absolute advantage in the proportion of market value. Fed tightening expectations and higher-than-expected inflation also failed to stop U.S. stocks from rally.

Michael Hartnett, a well-known analyst at Bank of America, first emphasized in the latest titled "A Brief History of Bubbles" that all asset bubbles are built on a sound and solid economic foundation, and that cheap and declining interest rates are a prerequisite for the formation of asset bubbles, and that the current spread between high-rated U.S. bonds (investment-grade corporate bonds) and U.S. Treasuries has narrowed to 86 basis points, the lowest since 2020, while the concentration of U.S. stocks has reached the highest point since 2009

The top 5 in the U.S. have contributed 75% of the S&P 500's gains so far. The top three tech stocks by market capitalization account for 90% of the tech sector's gains so far. As you can see in the chart below, the breadth of the U.S.** market is now the worst since March 2009, when the S&P 500 had a low of around 666 after the collapse of Lehman Brothers.

JPMorgan quantitative strategists also pointed out that the current concentration of U.S. stocks is second only to the dot-com bubble, and as of the end of December, the share of the top 10** in the MSCI U.S. index has risen to 293%。In the long run, this proportion is second only to 33 in June 20002% all-time peak.

Hartnett pointed out that in addition to concentration, today's rally in the "Big Seven" of U.S. stocks has many similarities with the tech bubble period, including bubble catalysts, valuations and real returns

Catalyst: The bubble is driven by technological innovation, as well as expectations of Fed easing. The AI bubble was fueled by the Federal Reserve's continued heat over Silicon Valley Bank and ChatGPT.

*: "Bubble" means a huge increase from trough to peak, with the Big Seven averaging 140% gain over the past 12 months, close to the 180% Magnitude of the Dow Jones in the 20s, but not yet the 190% of the dot-com bubble.

Valuations: The Big Seven are currently trading at 45x tracking P/E, but they really haven't reached the more "ridiculous" valuations of the previous bubble highs: 67x Nikkei at the peak of Japan** in 1989, 65x the Nasdaq Composite in 2000 (and 205x the shocking Nasdaq 100), and 60x at the peak of the FAANG in 2021.

Bonds: Whether bond yields are sustained or not is a key indicator of whether a bubble period has arrived, and in 12 of the 14** bubbles observed, bond yields rose when the bubble peaked. In general, a rise in real interest rates due to tight monetary policy is a common catalyst for the "bursting of bubbles", with 4% of real interest rates bursting the dot-com bubble and 3% of real interest rates bursting the subprime mortgage crisis. Given the significant increase in global debt levels today relative to history, the 10-year real interest rate, currently at 2%, may need to rise to 25-3% to end the frenzy of AI.

If the "Seven Sisters" are truly unique, then their remarkable performance may be justified. Unfortunately, this is not the case, and instead there are growing signs that investor enthusiasm for these seven ** reflects today's speculative, momentum-driven markets, but investor short-sightedness has led to huge opportunities elsewhere.