Warren Buffett Indicator, which tracks the value of all publicly traded U.S. stocks compared to the country’s GDP, has smashed another new new record: 221%.
That makes this the most expensive stock market the U.S. has ever seen. It also means valuations are now more than double the size of the actual economy.
This ratio has long been Warren’s go-to signal for spotting market bubbles. It’s simple: when market cap flies too far above GDP, the stock market is basically running on fumes. And right now, it’s looking like the market is floating on hope, hype, and a lot of talks about AI.
Tech stocks rally as shutdown fears fade
Even as the government drowns in budget drama, Wall Street saw solid gains this week. The S&P 500 rose 1.4%, Dow Jones tacked on 1.5%, and the Nasdaq matched the S&P’s 1.4% jump. AI-driven optimism is still juicing investor appetite, even while analysts throw warning flags.
A deeper look at the 14-day Relative Strength Index (RSI) reveals a chunk of stocks now sitting in the “overbought” zone. That includes names like Robinhood, Micron, Western Digital, and Fair Isaac. An RSI above 70 suggests that a stock may be overheated. CNBC Pro filtered for stocks with an RSI above 70 and at least a 5% gain this week. Turns out, some of these names are flying a little too close to the sun.
Let’s start with Robinhood, which hit an RSI of nearly 76 after a 20% rally this week. The push followed its addition to the S&P 500 in late September, which pulled in a wave of investors. Bank of America raised its price target to $157, up from $139, suggesting about 7.7% upside from Friday’s close. Analyst Craig Siegenthaler wrote :
“We believe HOOD is positioned to perform well long-term as the broker continues to scale its business, launch additional products and capabilities, deepen current client relationships, and expand its TAM both domestically and internationally.”
Micron and Western Digital trigger overbought warnings
Micron Technology, one of the big AI winners this year, has now seen its stock more than double. This week alone, it surged again after smashing expectations on both earnings and revenue Tuesday. The company also gave a strong forecast for the next quarter. Revenue rose 46% year-over-year. That rally pushed its RSI to 81.7, a strong overbought reading. Despite the run-up, analysts polled by LSEG say the stock could fall 4%, based on an average price target of $179.07.
Meanwhile, Western Digital is even more overstretched. Its RSI sits at a crazy 87.7, making it the most overbought stock of the week. Like Micron, it’s been riding the AI hardware wave, especially storage demand. It logged double-digit gains this week, and it was already one of the top-performing stocks in Q3. But LSEG analysts are warning that the stock could crash 22% from here.
Other AI-linked hardware names also made the list: Intel, Super Micro Computer, and Lam Research. All saw big weekly gains and RSIs above 70, pointing to a potentially crowded trade.
Another surprise entry on the overbought list is Fair Isaac, the firm behind the FICO score. The stock popped 20% after the company revealed a new model that lets mortgage lenders skip the credit bureaus entirely. Its RSI is now above 79. That Thursday jump was its biggest one-day gain since November 22. Still, the stock remains down for the year, despite this week’s rally.
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