'Even bigger chance of 150% rise': Fund manager on fears of AI bubble and market risks

Akshat Shrivastava, a hedge fund manager, on Monday suggested that AI stocks may continue to rise before any meaningful correction. He said there is a chance of a "50% correction", but an "even bigger chance of a 150% rise" in the US market, warning that those waiting for the AI bubble to burst may end up losing further.

The fund manager also said that if the US market were to fall, the Indian market would not rise. "If the US market falls, will the Indian markets rise?" he asked. "There have been zero instances when the US markets have fallen by 20% or more (bear market) and the Indian markets rose in that period."

Shrivastava said 2025 has been good for US stocks but "extremely bad" for Indian equities, and Indian investors have net-net become poorer. He also stated that there is growing talk about an AI bubble that could burst and hit the US markets hard. "Step back and think: Bubble bursting would mean at least a 20% crash in the US markets. And there is no way that the Indian markets will rise if that scenario plays out," he said.

According to the fund manager, the world is now deeply ingrained in the AI bet. Stock markets are converging, he said, outlining two choices for investors. "1) Invest and hope that the market keeps going up. Buy at somewhat sensible valuation. Hedge and take your chances; 2) Keep watching the AI bubble grow bigger. If you started doing that last year, you easily missed 40% gains."

"Yes, there is a good chance that a 50% correction will come some day. But there is an even bigger chance that the markets will run by another 150% before that," Shrivastava said. "If you are an optimist on AI, there is a ‘chance’ you’ll make money. If you are a pessimist on AI, the only way you make money is by shorting the AI story (similar to Michael Burry), who now runs a Substack subscription. There is nothing in the middle," he concluded.

On Sunday, American investor Michael Burry warned about the unpredictability of an AI bubble burst and criticised Nvidia's role in fuelling the hype around artificial intelligence. He, however, admitted that it was impossible to time or predict the burst of an AI bubble, adding that it may still have room to expand.