Peter Schiff warned of a possible correction in artificial intelligence (AI) investments after sharp declines in the shares of major technology companies.
In an interview on the podcast “The Peter Schiff Show,” the economist highlighted that Alphabet, Oracle, Meta, Amazon, and Microsoft posted significant losses during the week.
Alphabet fell 10% after announcing capital spending above expectations. Oracle dropped nearly 8%, while Meta, Amazon, and Microsoft lost 7,3%, 6,8%, and 2,7%, respectively.
For Schiff, investor behavior has changed. Previously, announcements of major AI investments used to boost the shares of tech giants.
“Investors are now finally starting to question whether these investments will really be worth it,” he said.
Tesla and SpaceX widen losses
SpaceX shares fell 7,7% during the week and are 49% below their post-IPO high. Tesla dropped 18% in the period and remains 35% below its 52-week high.
According to Schiff, the losses of the two companies reduced Elon Musk’s fortune by about US$ 100 billion in just one week.
The economist compared the annual spending of approximately US$ 750 billion on AI to the period before the dot-com bubble burst.
Japan worries Schiff
Schiff also pointed to Japan as a greater risk for the markets. The yen hit a four-decade low against the dollar, while the yield on 30-year Japanese bonds approached 4%.
Japanese public debt exceeds 200% of GDP. For Schiff, a crisis could trigger sales of U.S. Treasuries, since Japan holds more than US$ 1,1 trillion of these bonds.
“It could be the pin that bursts our bubble,” he said.
Schiff added:
“The bursting of the Japanese bubble ends up puncturing the even bigger U.S. bubble.”
In the United States, the 30-year Treasury closed at 5,16%, the highest level since 2006. Oil also exceeded US$ 100 per barrel in July, while gold rose about 1% during the week.