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The ongoing stock market boom is being fuelled by a single powerful source: the euphoria surrounding Artificial Intelligence. Yet the first cracks are beginning to appear. Recent corrections in Oracle’s share price have raised doubts about the sustainability of the rally. “Investors are repositioning themselves – torn between enthusiasm for the AI boom and growing scepticism about its economic substance,” explains Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM. Here’s what investors should keep in mind.

High inflation, geopolitical tensions and moderate economic growth – none of these have slowed the stock markets in recent months. The ongoing uptrend continues to be driven by hopes linked to Artificial Intelligence (AI). Recently, several major deals have added further momentum. OpenAI, for example, plans to award contracts worth more than one trillion US dollars in the coming years – including to Oracle, Broadcom and AMD.

The figures are impressive but also raise questions. The infrastructure required for this vision would demand between ten and twenty gigawatts of energy – equivalent to around 20 nuclear power plants – and investment volumes of 15 to 20 billion dollars per facility. “This shows that the AI dream has immense physical and financial dimensions,” says Fischer.

At the same time, market sentiment is shifting into a new phase. According to the latest Bank of America Fund Manager Survey, 54 per cent of fund managers now see an “AI bubble” as the biggest current risk to global financial markets. The International Monetary Fund also warns in its latest stability report of “high valuations” and a “growing concentration risk”, noting that the boom is increasingly dependent on just a few stocks.

Markets were recently shaken by Oracle: after gaining around 70 per cent since the start of the year, the share price dropped by seven per cent on two consecutive days before partially recovering. The trigger was a report of lower-than-expected cloud margins. The reality behind the numbers: strong demand, but far lower profitability than in the traditional software business.

According to The Information, Oracle generated around 900 million US dollars in revenue last quarter from renting out Nvidia servers – but with a gross profit of only 125 million dollars, equating to a margin of roughly 14 per cent. Smaller contracts even resulted in losses. Meanwhile, Oracle is investing billions in new server farms and chip purchases to keep pace in the race for AI data centres. For now, growth is covering the debt – but if margins continue to fall, leverage could quickly become a burden.

“For private investors, this means the AI boom is not a one-way street,” Fischer explains. Behind the spectacular contracts lie real costs for energy, hardware and financing. Those investing in AI stocks should therefore be selective. Infrastructure companies remain growth areas – but with rising valuation and margin risks. “Diversification is more important than ever,” Fischer adds. A portfolio combining stable cash-flow companies with targeted AI exposures offers more security than blindly chasing the next AI winner. “The long-term trend remains intact, but the market phase is marked by excess. At times like these, patience and a cool head are worth more than the next AI headline.”