Photo by Steve Johnson on Unsplash

Stocks continue to exhibit bullishness, but in the intermediate term, multiple major red flags are appearing.

It is no secret that the driving force for the S&P 500 has been big tech’s earnings/ AI build out. The top 10 Big Tech companies account for nearly 40% of the S&P 500’s weight. And collectively these companies and their earnings accounts for MOST of the stock market’s profits and performance. As Goldman Sachs notes, if you remove the MAG 7 companies’ performances from the index, the majority of stocks are barely up over the last decade!

Put simply, the ENTIRE stock market is effectively one gigantic bet on Big Tech and AI.

There’s just one problem with this… there is NO guarantee that the AI revolution will produce the intended results. Yes, there is the potential for AI to dramatically increase productivity and corporate profits… but that is potential NOT reality. And it’s quite possible that the AI roll out will have plenty of hiccups.

Case in point, OpenAI’s latest software is producing hallucinations a third of the time! And in point of fact, the more advanced the AI system… the MORE lies/ hallucinations it has!

OpenAI’s latest reasoning systems, according to their own report, show hallucination rates reaching 33% for their o3 model and a staggering 48% for o4-mini when answering questions about public figures, more than double the error rate of previous systems…

OpenAI is not the only company experiencing this issue… AI models from Google, and Chinese startup DeepSeek are also experiencing MORE errors, not fewer as they become more powerful.

Could this be the pin the AI bubble is looking for? That remains to be seen. But this is the first MAJOR red flag that the AI revolution will not unfold without some major “hiccups.” And given how much of the stock market’s performance is hanging on this technology, the potential for some MAJOR moves is quite high.

With this in mind, investors should ride the current bull market in stocks while keeping one eye on the exits. We are urging our clients to do precisely this with a tool we’ve developed that has accurately predicted every major market collapse in the last 40 years.

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