Does Anyone Still Believe In The AI Bubble After This?

Recommend buying US index-tracking assets backed by a strong earnings season and resurgent buybacks: 92% of S&P 500 firms have reported with 82% beating EPS expectations and year-over-year earnings growth of 13.1%, while buyback announcements are set to rise about 15% year-on-year; Berkshire Hathaway’s recent $4.3bn purchase of 17.8 million Alphabet shares is cited as evidence against an AI bubble. The author cites alternative data—CoStar’s 0.31% October rent decline—as a potential deflationary signal and uses historical November returns to project S&P 500 year-end targets of ~7,185 (4.9% upside) or a conservative ~7,076 (3.3%); Seeking Alpha quant tools reportedly align with the buy view. Key risks flagged include weak breadth (only 26% of S&P names outperforming over three months), record retail equity exposure (52% of household assets), vehicle-loan delinquency levels unseen since 1994, and the potential for a severe November drawdown, so vigilance is advised.

Analysis

Earnings momentum is the primary bullish driver: 92% of S&P 500 companies have reported, 82% beat EPS expectations, and reported annual earnings growth is 13.1%, which would mark a fourth consecutive quarter of double-digit growth if sustained. Corporate capital return activity is resurging with buyback announcements tracking ~15% higher year-on-year, and high-profile institutional buying — Berkshire Hathaway's disclosed $4.3 billion purchase of 17.8 million Alphabet shares on November 14 — is cited by the author as evidence against an AI-driven valuation bubble.

Macroeconomic and alternative data introduce important nuances. CoStar reported a 0.31% rent decline in October, the largest in 15 years, which the author links to lower immigration and potential deflationary pressure in housing into 2026; the end of the government shutdown will also restore official macro releases and likely increase short-term volatility as delayed data prints arrive.

Key internal market risks temper the bullish case: market breadth is narrow with only 26% of S&P names outperforming over the past three months, household equity exposure is at a record 52%, and vehicle-loan delinquencies are at levels not seen since 1994. Historical November return-based S&P targets cited are 7,185 (4.9% upside) and a conservative 7,076 (3.3%), and the author reiterates a buy recommendation while urging vigilance on the flagged risks.

Key Decisions for Investors

• Increase or maintain core exposure to US large-cap index-tracking ETFs given 82% EPS beats, 13.1% earnings growth, and projected year-end S&P targets, but size initial buys to risk tolerance
• Trim or avoid concentrated single-stock positions and consider partial profit-taking on top performers given very narrow breadth (26% of names driving returns) and elevated household equity exposure
• Implement downside protection sized to portfolio risk (index put options, collars, or increasing cash) to guard against a possible severe November drawdown and macro data volatility as delayed prints resume
• Use corporate actions and institutional flows as tactical signals: monitor buyback cadence and large investor purchases (eg, Berkshire's Alphabet buy) for rotation opportunities into AI/tech beneficiaries
• Monitor housing and credit indicators closely—specifically rent deflation signals (CoStar 0.31% drop) and vehicle-loan delinquency trends—since disinflation or rising consumer stress could alter rate expectations and equity multiples