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Investing.com -- Evercore ISI said the artificial intelligence-driven equity rally may still be in its early stages, even as concerns about a bubble build.
“Discussion of ‘Bubbles’ has officially entered the market dialogue,” the firm wrote in a strategy note.
A flash survey of clients found that 67% believe a bubble has begun to inflate. Evercore ISI, led by strategist Julian Emanuel, put the odds at 25% that the S&P 500 could overshoot its 2026 target of 7,750 and reach 9,000 by year-end 2026.
But Emanuel stressed that “a Bubble has a long way to go.” He pointed to Alan Greenspan’s famous “irrational exuberance” warning in 1996, which was followed by a 500% rally in the Nasdaq before the dot-com peak.
With corporate America’s AI adoption still at only 25%, Evercore ISI argued the moment looks “more analogous to the early Internet in 1996.”
Sentiment remains subdued compared with past bubbles, the firm added. “Not only would we expect to see a Bullish surge, but the mountain of cash [would] be deployed and margin used extensively.”
Gains among AI leaders this year remain far below the extremes of the dot-com era, when Cisco shares surged many times over.
Still, Evercore ISI warned that “further to run” does not rule out volatility. During the dot-com boom, the Nasdaq suffered “numerous 10%+ pullbacks.” The firm expects market turbulence to persist through October.
Strategically, Evercore ISI advised investors to own the so-called “Mag 7” AI enablers, adopters and adapters, while using options for “limited risk/theoretically unlimited reward participation.”