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Artificial Rally or Intelligent Rally ?

Since the beginning of the year NASDAQ ( US Tech Stock Index) is having the best rallies. The rally has been so tempting that it has forced retail investors to return after many months. But the majority of this rally has been enjoyed by institutional investors and some high net-worth investors.

The foundation and excitement of the rally have been around the Artificial Intelligence ecosystem. Though the base was constructed in the last four to five years by Google's acquisition of DeepMind and a billion dollar raised by OpenAI without any product. But the real inflexion point came in November 2022 when ChatGPT was launched.

The problem with this kind of rally is that it is very selective as the small basket of stocks sees the buying at any and every level. As of now, this basket has contributed almost 67% of the S&P 500 return for this year. It has resulted in valuations overstretched by a large margin.

Though in the medium and long term, these stocks might deliver much high returns than anticipated. But in the short term, any negative flow or selling by those large holders would result in a quick and strong reversal.


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