U.S. small and mid-cap stocks are up 20% this year, but analysts warn of a “non-profit-driven” bubble risk

Glonhui July 14th｜US small and mid-cap stocks are breaking free from years of stagnation, experiencing the best returns in more than two decades as investors rotate out of high-growth tech giants and into undervalued stocks benefiting from the artificial intelligence investment boom. So far this year, the benchmark US small-cap Russell 2000 Index has risen by 20%, set to achieve its best performance since 2003, while the blue-chip S&P 500 Index is up 10%, and the so-called “Magnificent Seven” tech stocks have gained less than 3%. However, some analysts point out that the current gains in small and mid-cap stocks are largely driven by unprofitable components, leading to concerns of excessive optimism and a bubble, with questions over sustainability.