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Many on Wall Street have been asking themselves whether markets are getting too euphoric — and if there’s a bubble waiting to burst. The S & P 500 notched an all-time closing high earlier this month, and although it was down last week the Wall Street index is still up more than 9% so far this year. The Nasdaq Composite has also jumped more than 9% year-to-date. But the gains have been heavily concentrated among the “Magnificent Seven,” led by Nvidia, which has soared since last year on the back of the artificial intelligence buzz. Many more AI-linked stocks have also rocketed , such as Super Micro Computer . Veteran tech investor Paul Meeks , co-chief investment officer at Harvest Portfolio Management, says AI infrastructure plays that enable the building of large language models “have legs,” naming Nvidia and Advanced Micro Devices as examples. But on the flip side, some small-cap AI plays are “dangerous,” he told CNBC Pro . He compared this moment to the dotcom era when the internet bubble burst, saying, “You had some success stories, right. Amazon was created, Alphabet was created, Meta was created. But most of those companies with their Internet products, a lot of them went bankrupt. I see the same thing here. There’ll be some big winners, but a lot of these companies that say that they [have] AI stories today are going to go bust.” Meeks is so bearish on them that he has shorted some of these AI-linked stocks and is even looking for more. Short sellers aim to profit by selling borrowed shares and buying them back later at a lower price. “Investors are wrongfully driving up stocks of AI pretenders, which are mostly creating apps using AI that are yet unproven & may never be that profitable,” he added. Meeks named three companies that are ripe for shorting right now: music-tracking app SoundHound , BigBear.ai , and C3.ai . SoundHound is up around 300% year-to-date, while BigBear.ai has risen 10%, and C3.ai is down 1.5% in the same period — though it’s up 31% from a year ago. He has shorted the first two and says he’s profited from those trades. “I’ve been successful shorting BBAI & SOUN the shares of which have been boosted with everything else even remotely related to AI, but they’re crappy companies. ADBE’s disappointing quarterly guidance announced last night was further proof of “where’s the revenue growth in AI?” “I’m looking for more stocks to short based on my contrarian AI investment thesis,” he said.
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