Buffett Indicator Hits Record High, Sparking Fears of 'Severe Overvaluation' and AI Bubble

As the New York stock market continues its rally fueled by the AI boom, the "Buffett Indicator" has hit an all-time high, once again raising concerns that the U.S. stock market may be severely overvalued.

According to Yahoo Finance on June 10 (local time), the Buffett Indicator recently reached 232.5%, marking the highest level on record.

Data from the financial analysis platform GuruFocus shows that this indicator has surged 13% since its low on March 30, reaching its highest point since data collection began in 1970.

The Buffett Indicator is calculated by dividing the total market capitalization of the U.S. stock market by the annual nominal GDP. It is considered a key metric for gauging how much the stock market has inflated relative to the real economy.

A reading of 100% on the Buffett Indicator means that stock prices are roughly in line with GDP, while a figure exceeding 200% is interpreted as a signal of overvaluation.

At over 230%, the current Buffett Indicator has entered a range of "severe overvaluation."

Yahoo Finance analyzed that if the current level persists, there is a possibility that the U.S. stock market could see negative returns over the next year.

Despite the warnings of overheating, Warren Buffett continues to invest in the growth potential of the AI industry, as evidenced by Berkshire Hathaway's large holdings in Apple stock.

A report by Goldman Sachs equity strategist Ben Snider, cited by Yahoo Finance, explained, "The pace of the recent stock market rally is so fast that it is increasing investor anxiety," adding, "As questions grow about how long the bull market can last, there is active movement to find signals that can determine if the market peak is imminent."

Reported by Kim Minjeong | Video by Ryu Ji-soo | Graphics by Yang Hye-min | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.