JPMorgan CEO Jamie Dimon underscored that tone of caution while speaking to reporters on Tuesday<\/a>, calling elevated asset prices \u201ca category of concern.\u201d<\/p>\n \u201cWhen asset prices are elevated, you have further to fall,\u201d Dimon said, adding that while \u201cconsumers are still spending [and] companies are making money,\u201d valuations and credit spreads remain stretched.<\/p>\n \u201cYou have a lot of assets out there which look like they\u2019re entering bubble territory,\u201d he said. \u201cThat doesn\u2019t mean you don\u2019t have 20% to go \u2014 it\u2019s just one more cause of concern.\u201d<\/p>\n That caution comes as new sentiment data shows investor exuberance reaching extremes.<\/p>\n Bank of America\u2019s latest Global Fund Manager Survey, released Tuesday, cited an \u201cAI equity bubble\u201d as the top global tail risk for the first time in its history<\/a>.<\/p>\n The survey, which polls roughly 200 fund managers overseeing nearly $500 billion in assets, also showed cash levels falling to 3.8%, near BofA\u2019s \u201csell\u201d threshold of 3.7%. Historically, readings below 4% have marked periods of peak risk appetite, often surfacing late in the market cycle.<\/p>\n That optimism is showing up in institutional positioning data too. State Street\u2019s Risk Appetite Index, cited by DataTrek Research, shows large professional investors \u2014 or so-called \u201cBig Money\u201d investors \u2014 entered the fourth quarter as bullish as they\u2019ve been all year, adding to riskier assets for five straight months.<\/p>\n \u201cAbsent a very large shock, it is unlikely they will change their views soon,\u201d wrote Nicholas Colas, co-founder of DataTrek.<\/p>\n Another early warning sign: Correlations across sectors have fallen to their lowest level since the current bull market began. Colas said these \u201cunusually low\u201d readings tend to appear when investor confidence runs \u201ctoo high\u201d and is a pattern that often precedes short-term pullbacks.<\/p>\n And as investors double down on risk, companies are matching that conviction and pouring billions into AI<\/a>.<\/p>\n Google (GOOGL<\/a>, GOOG<\/a>) just unveiled a $15 billion investment in India <\/a>to build its largest data center hub outside the US, while AMD (AMD<\/a>) shares jumped thanks to a new chip partnership<\/a> with Oracle (ORCL<\/a>).<\/p>\n Walmart (WMT<\/a>) also unveiled a partnership with ChatGPT maker OpenAI<\/a> to expand AI-powered retail tools. Notably, OpenAI has moved aggressively to lock in chip and infrastructure deals over the past few weeks, inking agreements with Broadcom (AVGO<\/a>), AMD (AMD<\/a>), and Nvidia (NVDA<\/a>) as it diversifies its supply chain \u2014 a self-investment cycle<\/a> some analysts say could be amplifying bubble risks.<\/p>\n \u201cI absolutely believe we are [in an AI bubble],\u201d Michael O\u2019Rourke, chief market strategist at JonesTrading, told Yahoo Finance on Tuesday, citing recent tech megadeals as evidence of how overheated the market has become.<\/p>\n O\u2019Rourke highlighted Google\u2019s $15 billion data center project alongside OpenAI\u2019s roughly $1.5 trillion in AI build-out plans, noting the contrast with the company\u2019s $13 billion in annual revenue and lack of profitability.<\/p>\n \u201cThat\u2019s where investors should recognize there\u2019s a disconnect,\u201d he said, adding that Big Tech\u2019s next round of earnings could reveal whether spending on AI infrastructure is finally hitting a wall.<\/p>\n But not everyone agrees the rally has reached mania. Some analysts argue the market\u2019s strength reflects conviction, not complacency, and that the AI trade, while stretched, still has fundamental backing.<\/p>\n \u201cI wouldn\u2019t call it an AI bubble,\u201d said Lale Akoner, global market analyst at eToro. \u201cWe\u2019ve certainly passed the early discovery phase into what I’d call ‘pricing to perfection.’ Investors are pricing the story over the execution, and that could mask pure execution, especially for some of the smaller-cap firms.”<\/p>\n “However, I don\u2019t think that we are seeing a manic investor psychology,” she added. “I think today\u2019s mood is quite optimistic, and there are some elements of FOMO as well<\/a>, but I wouldn\u2019t call it universally euphoric. These tech firms are quite strong in terms of their balance sheets again, and it is a priced-for-perfection story rather than a bubble story.\u201d<\/p>\n Still, as DataTrek\u2019s Colas noted, Wall Street\u2019s optimism hinges on Big Tech delivering on earnings.<\/p>\n Analysts expect double-digit earnings and revenue growth for companies like Nvidia, Microsoft (MSFT<\/a>), and Alphabet through 2026 \u2014 far outpacing the broader S&P 500.<\/p>\n \u201cThese [names] have high bars to meet on the top and bottom lines, leaving less room for upside surprises,\u201d Colas said.<\/p>\n Allie Canal<\/a> is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal<\/a>, LinkedIn,<\/a> and email her at alexandra.canal@yahoofinance.com.<\/p>\n Click here for the latest stock market news and in-depth analysis, including events that move stocks<\/a><\/p>\n Read the latest financial and business news from Yahoo Finance<\/a><\/p>\n Wall Street is warning the AI trade may be overheating as record spending, investor optimism, and soaring valuations fuel fresh fears of a bubble. (Photo by Johannes EISELE \/ AFP) (Photo by JOHANNES EISELE\/AFP via Getty Images) \u00b7 JOHANNES EISELE via Getty Images <\/p>\n