Footsie hits new record high as investors brush off fears AI bubble will burst – at least for now

The London stock market has hit a new record high as investors brush off warnings that the tech bubble is set to burst.

After a nervy morning following a heavy sell-off on Wall Street on Tuesday, the FTSE 100 closed 0.6 per cent higher at 9777.08 on Wednesday.

That surpassed the record set last week and will ease concerns of an imminent crash.

US markets also bounced back following the previous session’s rout that saw nearly £400billion wiped off the value of artificial intelligence (AI) stocks and fuelled fears of a major correction.

The earlier slump came as hedge fund tycoon Michael Burry – whose success in predicting the subprime mortgage crash in the US was depicted the film The Big Short – placed an £845million bet against AI.

But analysts said those counting on a crash will be disappointed – at least for now – with many observers concerned that excitement over AI has pushed stock markets unrealistically high.

The FTSE 100 index bounced back as traders in the City brushed off fears over an AI bubble 

A crash would hammer millions of British savers with money tied up in the stock market through their pensions, ISAs and other investments.

Chris Beauchamp, chief market analyst at investing and trading platform IG, said: ‘Traders who thought this unstoppable market was about to get its just desserts have been bitterly disappointed, as stock markets rebound from the selling that seemed to have such a firm grip just a few hours ago. Once more the wall of buying has come in to take advantage of this latest dip.’

Warning the ‘crash calls’ were ‘premature for now’, he added: ‘Stocks don’t undergo crashes when everyone is expecting them. Once more, the bears find themselves shut out of the party.’

Danni Hewson, head of financial analysis at AJ Bell, said the New York market opened in ‘bounce-back mode after Tuesday’s stumble’.

She added: ‘Bubbles don’t tend to go pop of their own free will – there is usually a catalyst that sparks a rush for the rubber slides. On that front the US economy still looks like it’s growing at a reasonable rate and the Fed is in the middle of a rate-cutting cycle. 

‘Then again, sometimes the match that lights the blue touchpaper appears out of nowhere. For now though, buy the dip continues to be a winning trade, and that success will likely only attract more investors to the strategy.’