Bank of America strategists compare the current market structure to the peak of the 2000 dot-com bubble, with the key data showing that when the S&P 500 index hit new highs, only 20 constituent stocks were simultaneously reaching record highs, and these were highly concentrated in AI and semiconductor sectors. This aligns with recent observations of weakening market breadth indicators and declining advance-decline lines.

From an industry perspective, this rally is driven by demand for AI infrastructure. Early investors in NVIDIA, such as Gavin Baker, have explicitly strategized to "go long on AI infrastructure bottlenecks and short overall market risk," and recent market gains have expanded from training chips to inference chips (like Intel) and memory (Micron, SK Hynix).
The most notable detail is Hartnett’s suggested defensive approach: increasing allocations to long-term bonds and sectors that underperformed at the end of the bubble. This implies that the turning point he anticipates may not be the collapse of the AI narrative, but rather a passive rotation of capital from overly concentrated tech stocks to other asset classes in a high-interest-rate environment. Defensive positioning itself has become a hedge against the current extreme market structure.
On June 1, Bank of America Chief Investment Strategist Michael Hartnett’s latest report pointed out that the current US stock market structure bears a strong resemblance to the late 1990s internet bubble peak, warning investors to be cautious of late-stage bull market risks and gradually shift toward defensive allocations.
Data shows that the S&P 500 hit a record closing high on the last trading day of May, but only 20 stocks reached new highs simultaneously, most of which are related to AI and semiconductors. Hartnett noted that at the March 2000 internet bubble peak, only about 20 stocks also hit new highs.
Recently, the rally in US stocks has been mainly driven by the AI industry chain. In May, Micron Technology (MU) rose 87.8%, SK Hynix increased 81%, AMD rose 45.6%, and Samsung Electronics gained 43%. Driven by this, the Nasdaq Composite index rose a total of 25% over April and May, marking its best performance in over two decades for the same period. $ETH
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