Strategist Sees Gold’s Next Bull Run Coinciding With an AI Bubble Burst
As investors grow more skeptical of what has been called the biggest technology bubble in history—the AI bubble—gold’s months-long correction may be forming an important bottom. Fred Hickey, founder of the High-Tech Strategist investment newsletter, said in a recent interview that gold’s next bull market could coincide with the collapse of the AI bubble. Hickey said the intense enthusiasm surrounding artificial intelligence has diverted substantial capital from precious-metals markets. But he believes the forces driving the AI boom are gradually weakening, creating conditions for precious metals to regain momentum. Hickey said he is especially bullish on gold-mining stocks. Although their profit margins are at record highs, he said, their share prices remain near historic lows. After sharply reducing his mining investments near the January peak, he recently began rebuilding his positions as sentiment toward the sector improved. He added that he has maintained a core holding of physical gold even during major pullbacks. Looking more broadly, Hickey said nearly every major valuation measure has surpassed the extreme levels seen during the dot-com bubble. AI-related companies now account for nearly half of the S&P 500’s market capitalization, he said, while contributing very little to U.S. economic output. In his view, that has created a dangerous disconnect between financial markets and the real economy. “We are in a huge stock-market bubble,” Hickey said. He said the current environment closely resembles the late 1990s, when investors sold gold and shifted into high-growth technology stocks. The difference, he said, is that gold is not emerging from a 20-year bear market, as it was in 2000. “AI’s rise has again weighed on gold and mining companies,” Hickey said. “But we are still in a gold bull market.” Hickey said investment in AI has increasingly become detached from economic reality. Hyperscale technology companies continue to spend hundreds of billions of dollars building new data centers, he said, but the anticipated productivity gains have not yet materialized. He also said much of the sector’s earnings growth is not coming from sustainable end-user demand. Instead, he said, it is being artificially inflated through accounting gains, deferred infrastructure costs, and circular financing arrangements between semiconductor suppliers and cloud-service providers. At the same time, the economics of generative AI are deteriorating rapidly as low-cost open-source models from China put pressure on pricing across the industry, Hickey said. “Massive spending with no payoff,” Hickey said, adding that the pricing assumptions supporting many large-language-model providers are collapsing. “This is a huge bubble built on a lot of lies,” he said. Although Hickey acknowledged that a speculative bubble could last longer than many investors expect, he said signs of weakening are becoming increasingly clear. Weak performance by the so-called Magnificent Seven stocks, increased debt issuance by large technology companies, slower gains in semiconductor stocks, and greater difficulty financing AI infrastructure all suggest that investor enthusiasm is fading, he said. Hickey said ETF outflows had largely stopped after the major sell-off in the spring, while futures positioning had fallen to multiyear lows, indicating that excess speculation in the market had eased. “What we are seeing now in the gold market appears to be a bottoming process,” he said. Although gold prices may continue to consolidate, Hickey said the uptrend is far from over. Unlike previous bull-market peaks, he said, this year’s rally has not displayed the speculative characteristics typically associated with a major top. Retail investors have never embraced gold enthusiastically, Hickey said. Small-cap mining stocks have not experienced the buying frenzy seen in earlier cycles, and ETF inflows have been surprisingly weak during most of the bull market. Instead, central-bank demand remains the primary driver. Hickey said official-sector gold purchases of more than 1,000 metric tons a year, together with global de-dollarization, are structural factors that have remained firm despite the recent pullback in gold prices. He said growing concerns about the U.S. fiscal deficit, rising government debt, geopolitical tensions, and declining confidence in the dollar will continue to support long-term demand for gold. “The main drivers are a lack of confidence in the United States, de-dollarization, and central-bank buying—and all of those factors are still present,” Hickey said. “That is why we have not broken below $4,000, and why we will rise again.” Looking ahead, Hickey said gold’s next major advance could occur as the AI boom fades. He expects investors eventually to move money from overvalued technology stocks into undervalued hard assets, as they did after the internet bubble burst two decades ago. “I think they will come because they are disappointed with technology,” Hickey said. “They lost a lot of money and will look for alternatives. You will give them the final push.”
Hickey said the intense enthusiasm surrounding artificial intelligence has diverted substantial capital from precious-metals markets. But he believes the forces driving the AI boom are gradually weakening, creating conditions for precious metals to regain momentum.
Hickey said he is especially bullish on gold-mining stocks. Although their profit margins are at record highs, he said, their share prices remain near historic lows. After sharply reducing his mining investments near the January peak, he recently began rebuilding his positions as sentiment toward the sector improved. He added that he has maintained a core holding of physical gold even during major pullbacks.
Looking more broadly, Hickey said nearly every major valuation measure has surpassed the extreme levels seen during the dot-com bubble. AI-related companies now account for nearly half of the S&P 500’s market capitalization, he said, while contributing very little to U.S. economic output. In his view, that has created a dangerous disconnect between financial markets and the real economy.
“We are in a huge stock-market bubble,” Hickey said.
He said the current environment closely resembles the late 1990s, when investors sold gold and shifted into high-growth technology stocks. The difference, he said, is that gold is not emerging from a 20-year bear market, as it was in 2000.
“AI’s rise has again weighed on gold and mining companies,” Hickey said. “But we are still in a gold bull market.”
Hickey said investment in AI has increasingly become detached from economic reality. Hyperscale technology companies continue to spend hundreds of billions of dollars building new data centers, he said, but the anticipated productivity gains have not yet materialized.
He also said much of the sector’s earnings growth is not coming from sustainable end-user demand. Instead, he said, it is being artificially inflated through accounting gains, deferred infrastructure costs, and circular financing arrangements between semiconductor suppliers and cloud-service providers.
At the same time, the economics of generative AI are deteriorating rapidly as low-cost open-source models from China put pressure on pricing across the industry, Hickey said.
“Massive spending with no payoff,” Hickey said, adding that the pricing assumptions supporting many large-language-model providers are collapsing.
“This is a huge bubble built on a lot of lies,” he said.
Although Hickey acknowledged that a speculative bubble could last longer than many investors expect, he said signs of weakening are becoming increasingly clear. Weak performance by the so-called Magnificent Seven stocks, increased debt issuance by large technology companies, slower gains in semiconductor stocks, and greater difficulty financing AI infrastructure all suggest that investor enthusiasm is fading, he said.
Hickey said ETF outflows had largely stopped after the major sell-off in the spring, while futures positioning had fallen to multiyear lows, indicating that excess speculation in the market had eased.
“What we are seeing now in the gold market appears to be a bottoming process,” he said.
Although gold prices may continue to consolidate, Hickey said the uptrend is far from over. Unlike previous bull-market peaks, he said, this year’s rally has not displayed the speculative characteristics typically associated with a major top.
Retail investors have never embraced gold enthusiastically, Hickey said. Small-cap mining stocks have not experienced the buying frenzy seen in earlier cycles, and ETF inflows have been surprisingly weak during most of the bull market.
Instead, central-bank demand remains the primary driver.
Hickey said official-sector gold purchases of more than 1,000 metric tons a year, together with global de-dollarization, are structural factors that have remained firm despite the recent pullback in gold prices. He said growing concerns about the U.S. fiscal deficit, rising government debt, geopolitical tensions, and declining confidence in the dollar will continue to support long-term demand for gold.
“The main drivers are a lack of confidence in the United States, de-dollarization, and central-bank buying—and all of those factors are still present,” Hickey said. “That is why we have not broken below $4,000, and why we will rise again.”
Looking ahead, Hickey said gold’s next major advance could occur as the AI boom fades. He expects investors eventually to move money from overvalued technology stocks into undervalued hard assets, as they did after the internet bubble burst two decades ago.
“I think they will come because they are disappointed with technology,” Hickey said. “They lost a lot of money and will look for alternatives. You will give them the final push.”