AI ‘baby bubble’ is ‘growing up’ says Bank of America

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The “baby bubble” stock market rally, fueled by the faster-than-expected adoption of GenAi technology, is “growing up” according to analysts at Bank of America.

Nvidia (NASDAQ:NVDA) stock rose 16.4% yesterday following the much-anticipated earnings report. The AI chipmaker is now valued at around $1.94 trillion.

Despite this AI-fueled optimism, analysts warn against chasing the rally.

“Higher inflation & nominal yields/real rates the catalysts to cap/unwind upside…note number of small businesses set to hike prices in coming months on the rise again,” they wrote.

Commenting on the weekly flows, US small caps saw their highest weekly inflow since June 2022, totaling $5.1 billion, leading the charge in overall inflows into stocks and bonds.

During the week ending February 21, bonds drew in $15.2 billion and stocks garnered $15 billion, with cash receiving $2.1 billion, BofA said in a note referencing EPFR Global data.

Conversely, gold experienced outflows of $900 million.

The inflow into stocks included a notable $12.2 billion directed towards US equities, marking the largest inflow in eight weeks. Meanwhile, the bond market witnessed its ninth consecutive week of inflows. Precious metals, on the other hand, faced their fourth consecutive week of outflows.

Region-wise, emerging markets experienced their 12th consecutive week of inflows, amounting to $2.3 billion. Japan saw its sixth week of inflows, with $800 million coming in, while Europe faced its eighth week of outflows, also totaling $800 million.

Source: Investing.com