The AI Party Just Got Its First Noise Complaint From Wall Street’s Biggest Names

The AI hype train is starting to hit new speed bumps. A chorus of Wall Street’s most powerful CEOs spent last week warning investors that valuations have gotten out of hand, triggering a selloff that didn’t care whether companies beat earnings or not. The market’s finally waking up to what skeptics have been saying for months — stocks can’t trade at dot-com bubble levels forever, even if AI is changing the world.

The optimism exodus: Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick both cautioned investors to brace for a pullback, with Solomon specifically noting a correction of up to 20% is likely within the year. Capital Group CEO Mike Gitlin told a Hong Kong summit that valuations have become “challenging,” saying most people view stocks as somewhere “between fair and full” rather than cheap. The warnings triggered an immediate reaction, with the S&P 500 dropping over 1% as traders reconsidered whether the rally had run too far.

• The equal-weighted S&P 500 trades over 25% below the headline index, showing how a few mega-cap stocks are carrying the market — much like the late-1990s tech bubble setup.
• Crypto wasn’t spared either, with Bitcoin sliding 6% as risk-off sentiment spread across global markets, showing how interconnected these markets have become.

The Big Short: Take 2

Michael Burry isn’t known for following the crowd, and his latest bet suggests he thinks AI stocks are living on borrowed time. Scion Asset Management revealed $187M in put options against NvidiaNVDA

and a massive $912M short position against PalantirPLTR

, making up 80% of the fund’s portfolio. The disclosure spooked AI bulls, prompting Palantir CEO Alex Karp to call it “super triggering.” Nvidia slipped 4% after the news yesterday, while Palantir tumbled 8%.

• The S&P 500’s Shiller P/E just crossed 40 — only the second time since 1999, when investors faced a decade of losses, underscoring how stretched valuations have become.
• The S&P 500 has rallied over 15% through October, marking one of its best six-month runs since the 1950s — but it hasn’t seen a 5% pullback in months, a setup ripe for correction.

History’s expensive lesson: Research Affiliates now forecasts that large US growth stocks will deliver negative real returns over the next decade, while value stocks and international markets look far more attractive. With the Magnificent Seven accounting for 80% of recent gains and the equal-weighted S&P 500 actually falling, concentration risk is flashing red. Bank of America’s Savita Subramanian says, “AI stocks are pricing in transformative growth,” while “bears on consumer spending have been shaken out,” creating two expensive bets at once. In that context, the recent selloff may simply be the market’s way of correcting excess optimism and bringing valuations back to reality.