US Stocks Hit Record High on AI Rally, Raising Market Bubble Concerns

The AI rally has propelled US stocks to record highs, but concerns are growing about market overheating and the need for higher interest rates, particularly in the bond markets.

Mon Jun 01 2026

US Stocks Soar to Record Highs Driven by AI Rally

Bloomberg's Ven Ram highlighted the rapid advancements in AI technology as the primary driver behind the surge in US stock markets. He noted that the AI rally has been a dominant theme since the beginning of the year, enabling equities to withstand various challenges, including the unexpected Iran conflict. This resilience, he suggested, makes the market appear almost "invulnerable" to external shocks, pointing to potential overheating.

Rising Bond Yields and Warnings of Market Overheating

Ram expressed concerns that the stock market is excessively optimistic. He argued that the US 10-year Treasury yield, currently at 4.4670%, should be higher, closer to 5%, given the real growth rate of over 2.7% and inflation exceeding 2.5%. This implies that the Federal Reserve needs to raise rates. He also criticized the UK 2-year gilt yield, at 4.20%-4.25%, for not adequately reflecting the persistent inflation in the UK. Ram warned that the prolonged AI rally could lead to a market bubble if these underlying economic realities are not properly factored in by investors, necessitating further rate hikes.