Banking giant Barclays is flagging a sharp split beneath record equity indexes, warning that artificial-intelligence fervor is stoking risky pockets of speculation.
Analysts at the bank say the surface-level calm in the S&P 500 hides a very different reality, noting that individual stocks paint a volatile picture, reports Investing.com.
Barclays says it is keeping an eye on the three-month realized single-stock volatility, which serves as a proxy for the 50 largest companies in the S&P 500. According to the strategists, the metric is “historically elevated” against index-level movements. The bank adds that over the past two months, the spread has widened at a pace only surpassed 1% of the time in the last 30 years.
Artificial intelligence is at the heart of the divergence as investors race to invest in AI stocks amid news of capital expenditure spending plans to the tune of billions of dollars, involving names like Microsoft, Oracle and Nvidia. Barclays warns that the sentiment echoes the overexuberance witnessed during the dot-com bubble.
Analysts at the bank note that “the microstructure of AI investment is rich with examples of euphoric behavior” among smaller and less-profitable names.
The cautious view underpins the bank’s trade screen. Barclays highlighted “cheap put candidates among most euphoria stocks” with “greater downside potential.” The list includes the renewable-powered data center operator Iren (IREN), Lyft (LYFT) and Macy’s (MACY).
While Barclays appears to have flipped bearish on IREN, one tech stock strategist believes the name has a lot more gas left in the tank. Futurum CEO Daniel Newman said IREN is poised to benefit from the imminent shift in AI market emphasis, from training to inference.
“I see it as an interesting play into this AI inference explosion that is coming.
This ticker has some fire. What a passionate group of investors. Diving deeper this week into this name.”
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