Huge risk of AI-fuelled stock market crash with impact on people’s finances, IMF warns

Story by Graham Hiscott

Chip giant Nvidia has become the world’s most valuable company under CEO and founder Jensen Huang© AFP via Getty Images

One of the world’s top economic bodies has warned of the risk of an AI-fuelled stock market bubble.

Pierre-Olivier Gourinchas, the IMF’s chief economist, said: “We are seeing valuations that are quite stretched.” He added: “Our job is to look for potential risks and this is certainly one of the risks… There are echoes in the current tech investment surge with the dotcom bubble of the late 1990s. It was the internet then, it is AI now.” Mr Gourinchas said there was a risk that stock markets could “reprice sharply”, with knock-on impacts for people’s finances and the wider economy.

OpenAI boss Sam Altman’s personal fortune is estimated at £1.4billion© AFP via Getty Images

The IMF’s Global Stability Report said share prices could “collapse” if tech firms fail to deliver. It warned that, on some measures, the dangers were “substantially higher than during the dotcom bubble.”

Its warning follows a growing number of respected bodies, central banks and industry chiefs about a possible stock market bubble. It comes after Bank of England Governor Andrew Bailey said a stock market bubble could be about to burst as fears grow over the inflated value of AI tech companies.

In a letter to G20 ministers, he said increased debt levels and a failure to fully implement agreed financial reforms would lead to increased vulnerability. Mr Bailey, ahead of the latest IMF meeting, cautioned that there could therefore be a “disorderly adjustment”, which would see asset prices slump from recent highs.

Jamie Dimon, the boss of investment banking giant JP Morgan, is among those to have warned that there is a significant risk of a slump in stock valuations in the next six months to two years.

Bank of England Governor Andrew Bailey has added his voice to concerns about the value of AI companies© Getty Images

Nvidia, the chipmaker whose technology is integral to the roll-out of AI, has seen its shares leap 40% this year and has a market valuation of £3.5trillion, making it the most valuable company in the world. It was only founded 12 years ago.

There are also worries about the circular nature of the money flowing around the AI industry. A number of the deals struck by Nvidia have been seen as the chipmaker financing its customers to buy its chips. These types of agreements were said to be a characteristic of the dotcom boom.

Ruchir Sharma, from research firm Rockefeller International, estimated that 40% of America’s economic growth this year was due to AI spending.

Warren Buffett’s Advice as the Buffett Indicator Reaches 200%, Indicating Stock Valuations in Dangerous Territory

Story by Niloy Chakrabarti

Warren Edward Buffett ©warrenebuffett_official/Instagram© IBTimes

Warren Buffett’s stock market valuation indicator, which divides the total US stock market capitalisation by the latest quarterly GDP estimate, recently surged past 200%, implying that US stocks are highly overvalued

In 2001, Buffett had described the metric as ‘probably the best single measure of where valuations stand at any given moment.’ The Oracle of Omaha had stated that the market would be ‘playing with fire’ when the indicator rose too high

Although the indicator is not recommended for timing the market, it signals the potential risk of investments. The current indicator reading implies that the gap between stock prices and economic output is unusually wide, fueling concerns about future returns.

However, note that today’s stock market is not the same as those decades earlier. Back then, the market was dominated by smokestack industries and cyclical companies. At present, the S&P 500 is dominated by megacap tech giants like Apple, Alphabet, Nvidia, and Microsoft, known for generating robust free cash flow and recording market share gains consistently. These companies could also be relatively less tied to economic cycles.

Buffett’s ‘Mr. Market’ Advice

Buffett’s core investment advice is about a character called ‘Mr. Market.’

‘Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful,’ Buffett had stated.

The metaphorical ‘Mr Market’ was invented by Buffett’s mentor, Benjamin Graham, who is known as the father of value investing. Graham created ‘Mr. Market’ to explain stock market behaviour. He taught Buffett at Columbia Business School and later hired him at his investment firm.

‘Mr. Market’ represents the market’s daily mood swings, which could be wildly optimistic or deeply pessimistic. Prices often reflect emotions rather than business fundamentals, which creates opportunities for disciplined investors to reap profits. Mr. Market offers to trade shares at different prices daily based purely on emotion.

Other times, Mr. Market gets ‘depressed and can see nothing but trouble ahead for both the business and the world. On these occasions, he will name a very low price, since he is terrified that you will unload your interest on him.’

‘The more manic depressive his behaviour, the better for you,’ Buffett had stated. This is because extreme mood swings lead to pricing errors.

‘When Mr. Market is euphoric, he’ll overpay for your shares. When he’s depressed, he’ll sell quality businesses at bargain prices. The wider his emotional swings, the more profit opportunities he hands you,’ according to the legendary investor.

The Berkshire Hathaway chair explained that ‘declining prices for businesses benefit us, and rising prices hurt us,’ adding that the most common cause of low prices is pessimism, which is ‘sometimes pervasive, sometimes specific to a company or industry.’

Buffett said he wants to do business in such an environment, ‘not because we like pessimism but because we like the prices it produces.’

One of the toughest cognitive dissonances to shift is investing when markets are frothy. If the index is setting new records, there’s less room to grow and more room to lose out, surely? That makes sense, but the data don’t agree. This week’s chart comes from Schroders’ head of strategic research, Duncan Lamont, who earlier this year attempted to assuage these fears.

As the chart shows, remaining invested will always be your best bet. If you were to cash out your investments at the end of a month that ends with an all-time high and then reinvest, you would be losing an enormous amount of capital – and that’s not even factoring in trading costs. I’ve said it before and I’ll repeat it: don’t panic, do sit on your hands, and only ever take a risk you can afford.

Easier to stay invested if your plan is for

Worried about the State Pension ? Here’s what I’m doing about it

The Triple Lock that protects the State Pension looks expensive. But Stephen Wright plans to build his own source of passive income in retirement.

Posted by Stephen Wright

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

It seems – to me anyway – that everyone thinks the Triple Lock that makes the State Pension rise every year is going to have to go sooner or later. So people like me need to take action.

The Triple Lock isn’t up to me directly. But I’m looking to act now to try and reduce the effect any changes might have on my retirement when the time comes.

Triple Lock

The full State Pension right now is £11,973 a year. And the Triple Lock means it increases each year by whichever’s highest out of inflation, average wage increases, or 2.5%. That’s a pretty nice deal, but it’s expensive. There’s disagreement about why and what to do about it, but I’m sensing a growing acceptance that it’s becoming hard to sustain.

If I’m right, thinking about other sources of income in retirement has never been more important. And the stock market’s top of my list.

There’s nothing quite like a government guarantee. But in the best cases, the income generated by owning shares in businesses can even outperform the Triple Lock.

Pension maths

Right now, I think an investor needs a portfolio worth around £299,325 to earn £11,973 a year. That’s based on a 4% average dividend yield, which looks realistic in today’s market.

Projecting ahead 30 years to when I retire, I think the State Pension could reach £29,061 a year (if the Triple Lock stays in place). That’s based on a 3% annual increase. 

Assuming a 4% dividend yield, someone looking to retire at the same time as me will need a portfolio worth £726,525 to have a realistic shot at this. And that might be achieveable.

Starting from scratch, someone who invests £1,000 a month needs a 4.5% average annual return to reach £726,525 within 30 years. And that’s well below the 6.8% FTSE 100 has produced over the long term.

A stock to consider

In terms of specific names, Informa‘s (LSE:INF) stock I like a lot. The firm’s a leader in the trade show industry and high intangible assets mean these events have very attractive unit economics.

With one important exception, the firm’s increased its dividend at a rate above the Triple Lock each year for the last 10 years. In other words, it’s been a growing income stream for investors.

The exception is Covid-19. Remote working proved challenging for live events and this kind of disruption (though hopefully not this specifically again) is a risk for Informa’s trade show business.

Every business however, goes through difficult times and the firm’s rebounded strongly. In a lot of ways, this highlights the company’s resilience, which is crucial for a long-term investment.

Independence

Ultimately, I – and others like me – have a choice when it comes to retirement. We can either hope for the best with the State Pension, or we can think about trying to build our own income streams.

Relying on the State Pension looks risky to me. It’s expensive and decisions about it aren’t in my hands, which is why I’m looking at shares in companies like Informa..

The business made £800m a year in free cash last year with a market value of less than £12bn. It’s firmly on my radar at the moment, but it’s not the only one.

Thursday 16 October

Invesco Bond Income Plus Ltd ex-dividend date
TwentyFour Income Fund Ltd ex-dividend date

TwentyFour Select Monthly Income Fund Ltd ex-dividend date

Foresight Solar Fund Ltd(FSFL)

Summary

• Price performance: FSFL (Foresight Solar Fund Ltd) closed at 76.2 GBp, up 1.06%. This performance indicates a positive trend compared to broader market indices, which saw declines such as the FTSE 100 (-0.86%) and FTSE 350 (-0.89%).
• Benchmark comparison: FSFL outperformed all major peers, including TRIG (-0.13%), UKW (+0.47%), and HICL (-0.33%). It also outperformed sector indices like FTSE Mid 250 (-1.14%), showcasing strong relative resilience.
• Investor outlook: Analysts rate FSFL as “Buy” with a mean price target of 93 GBp, reflecting a potential upside of over 20%. Despite trading above industry P/E averages, FSFL remains attractive for growth-oriented investors due to its robust net profit margin expansion and positive analyst sentiment.

Highlights

·    Net Asset Value (NAV) of £603.8 million and NAV per Ordinary Share of 108.5 pence (31 December 2024: £634.4 million and 112.3 pence), principally driven by lower power price forecasts.

·    Plentiful solar resource contributed to better-than-expected production in the UK, Foresight Solar’s core market. Global generation was 4.0% above budget in the six months to June.

·    Combined with an active power price hedging strategy, strong operational performance gives the board confidence in the 1.3x dividend cover target for the year.

·    The buyback programme was increased to a total of up to £60 million. In the first half of 2025, Foresight Solar distributed £29 million to Shareholders between dividends and buybacks.

18 September 2025

A 9.5% dividend yield! 2 dividend stocks to consider for long-term passive income

A lump sum or regular investment in these UK dividend stocks could yield substantial passive income over time, predicts Royston Wild.

Posted by Royston Wild

Published 12 October

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

These dividend stocks offer enormous yields and long records of payout growth. Here’s why they demand serious attention right now.

A top REIT

Real estate investment trusts (REITs) can be great shares to target long-term passive income. Sector rules state at least 90% of annual rental earnings must be paid out in dividends. This can make the cash rewards they deliver less volatile than those from other dividend shares.

Unite (LSE:UTG) is one trust I feel demands close attention. It operates in the highly defensive student accommodation market, which gives profits protection from changing economic conditions. Following its acquisition of sector rival Empiric Student Property, it will be the UK’s largest operator with 75,000 beds, chiefly centred on the country’s strongest universities.

Unite has proven one of the UK’s most reliable dividend growth stocks, with payouts rising almost every year since 2011. The only exception came in 2019 when Covid-19 uncertainty forced a reduction.

For this year, the REIT’s dividend yield is a large 6.2%, which is almost double the FTSE 100 average of 3.2%. This figure has been boosted by a sharp fall in Unite’s shares on Wednesday (8 October) — then, the company said sales to date had delivered rental growth of 4%, down from 8.2% in the same 2024 period.

I think this represents an attractive dip-buying opportunity to consider.

Competition is tough, and Unite’s problems are being compounded by extra stress on students’ budgets right now. But the long-term sector outlook remains robust, and the company’s increased scale gives it a significant advantage. I expect dividends to continue rising over the next decade and beyond.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Going green

Foresight Solar Fund (LSE:FSFL) is another top dividend stock worth serious attention after recent price weakness.

It’s fallen in value as optimism over sustained interest rate cuts over the next year have declined. As with Unite, asset values come under pressure when rates are higher, and cost of borrowing pressures increase.

While this issue can be significant, the impact it’s had on Foresight’s dividend yield merits serious consideration. Its forward yield is now an enormous 10.7%.

Like any renewable energy stock, the company has significant long-term investment potential as the move from fossil fuels continues apace.

Foresight has ambitious plans to capitalise on the green transition — the business has 1 GW of capacity across its assets, and plans to treble its development pipeline to 3 GW from current levels, with growth focused on the UK and Europe where clean energy policy is especially favourable.

Investing in energy producers has another significant advantage for investors. Electricity demand is largely unchanged across the economic cycle, giving companies the financial strength and the confidence to steadily raise dividends.

In the case of Foresight, annual dividends have risen each year since it listed on the London stock market in 2013. It’s a theme I expect to continue long into the future.

2 ETFS and a FTSE 250 trust to consider from the London Stock Exchange

Ben McPoland spotlights a trio of investment options from the London Stock Exchange. Collectively, they offer both growth and income potential.

Posted by Ben McPoland

Published 12 October

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. 

There are hundreds of different exchange-traded funds (ETFs) on the London Stock Exchange. They span everything from plain vanilla indexes to niche investing themes. Throw investment trusts into the mix, we’re talking thousands of different options!

Here are three that are worth exploring further.

UK property income

Let’s start with the iShares UK Property ETF (LSE:IUKP), which holds 33 UK real estate investment trusts (REITs). These include LondonMetric Property (logistics and retail warehousing), Primary Health Properties (GP surgeries and health centres), Unite (student accommodation), and Big Yellow (self-storage).

This sector remains out of favour due to higher interest rates. Rising borrowing costs restrict portfolio expansion plans, while investors can now find attractive yields in perceived safer havens like government bonds.

The fact that this ETF is concentrated on one sector makes it higher risk. Were the UK property market to enter a prolonged slump, this product would carry on underperforming (it’s already down 20% in five years).

On the plus side, though, investors are being offered a 4.5% dividend yield while they wait for a potential recovery. This should materialise as interest rates slowly but surely come down over the next couple of years.

Many [UK REITs] are trading at significant discounts to their net asset value, offering investors the chance to acquire real estate below its true value.

Kenneth MacKenzie, CEO of Target Healthcare REIT

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Asia Pacific dividends

To diversify an income stream away from UK property, an investor might also look at the Schroder Oriental Income Fund (LSE:SOI). This FTSE 250 investment trust offers broad exposure to dividend-paying companies across the Asia Pacific region.

What I like here is the trust offers a healthy level of geographic diversification. Mainland China accounts for just over 18% of assets, with the bulk of the rest made up of Taiwan, Australia, South Korea, Hong Kong, Singapore, and India.

Holdings include Samsung Electronics and Singapore Telecommunications, as well as DBS Group (Singapore’s largest bank). But it does have an outsized position in Taiwan Semiconductor Manufacturing. Any weakness in the Taiwanese chipmaking giant’s share price could negatively affect performance.

The rest of the ETF looks well-diversified, though. And over the next decade, I expect institutional investors to start allocating more capital outside the S&P 500. Asia should be a natural beneficiary of this — it’s worth noting that the trust has returned more than 20% year to date.

Finally, while Schroder Oriental Income Fund is trading at a record high, it still carries a decent 3.7% trailing dividend yield.

Cybersecurity trend

Finishing with more of a growth angle, we have the iShares Digital Security ETF (LSE:LOCK). This one holds 111 stocks across cybersecurity, including leading players like Arista Networks, MongoDB, Datadog, and Cloudflare.

As we’ve seen recently with high-profile hacks at Jaguar Land Rover and Marks and Spencer, beefing up cybersecurity is becoming a key operational necessity. And this spending is sure to be benefitting many of the ETF’s top holdings.

One risk I would highlight here is valuation. The average trailing price-to-earnings multiple of the ETF’s holdings is around 30. Were tech stocks to tumble, this would hit the fund.

However, to my mind, the cybersecurity trend just has so much further to run, especially as AI rapidly develops. I think investors should consider getting some portfolio exposure.

Here’s the Time-Tested Way to Make

15% Per Year From Stocks

There’s an untapped portion of the market few people know about …

It’s filled with stocks that seem “boring” to the uninformed investor…

Companies that rarely get coverage from the mainstream media …

Contrarian investments that are hiding their true potential …

However, if you look below the surface and read between the lines, these “Hidden Yield Stocks” offer intelligent investors the opportunity to deliver 15% total returns per year—no matter what the wider market does.

How?

Well, the answer lies in what I call “The Three Pillars.”

Pillar #1 – Consistent Dividend Hikes

Pillar #2 – Lagging Stock Price

Pillar #3 – Stock Buybacks

Together, these three pillars allow us to identify the stocks that are undervalued … overlooked … recession-resistant … and primed for major growth.

And by investing exclusively in these “Hidden Yield Stocks,” we can enjoy massive upside with very little downside … plus collect regular, reliable income through healthy dividend payouts!

Contrarian Investor

The current yield of NESF, is 14%. Is Mr Market flashing a warning sign, is Mr Market right ?

Sure, chasing high current yields will provide you with instant gratification, but it won’t give you the recession-resistant income … or the 15% year on year returns we want.

Instead, you need to focus on consistent dividend hikes.

In my opinion, selecting companies with a proven track of increasing their dividend payments is one of the safest, most reliable ways to get rich in the stock market. You see, every time a company raises its dividend, you start earning more from your original investment.

For example:

On a $1,000 initial investment, $30 in dividends equals a 3% return. Later, if the dividends go up to $40 a year, you are effectively earning 4% on your initial $1,000 investment.

As this trend continues, you could easily be earning 10%, 15%, even 20% per year just from rising dividends, as your initial investment never changes.

Contrarian Investor

Here’s a deeper look to help you decide:
📈 Current Price & Movement

• Price: 60.0 GBp
• Change: +0.4 GBp (+0.67%)
  This modest uptick suggests some short-term stability, but it’s not a strong momentum signal on its own.
  ☀️ Fund Focus
• NESF invests in solar photovoltaic assets, primarily in the UK, with some international exposure.
• It targets long-term income generation through government-backed subsidies and power purchase agreements.
  💰 Income Potential
• NESF is known for high dividend yields, often exceeding 6–7%, making it attractive for income-focused investors.
• Dividends are typically paid quarterly, and the fund aims to maintain or grow payouts over time.
  🧱 Risk Profile
• Interest rate sensitivity: As a yield-focused fund, NESF may face pressure if UK interest rates rise further.
• Inflation-linked revenues: Many of its contracts are inflation-linked, offering some protection.
• NAV discount: Like many listed infrastructure funds, NESF may trade at a discount to NAV, which can be an opportunity or a red flag depending on market sentiment.
  🔍 Considerations Before Buying
• Peer comparison: How does NESF stack up against other renewable infrastructure funds like Bluefield Solar (BSIF) or Foresight Solar (FSFL)?
• NAV trends and dividend cover: Check recent reports to assess sustainability of payouts.
• Market outlook: If you believe in the long-term resilience of UK solar and infrastructure income, NESF could be a compelling hold.
• CoPilot

Pillar #1 – Consistent Dividend Hikes

Pillar #2 – Lagging Stock Price

If you include dividends the NAV if flatlining, the worry is that it may eat it’s own tail with the dividend payments.

Dividend:

·   Total dividends declared of 2.10p per Ordinary Share for the Q1 period ended 30 June 2025 (30 June 2024: 2.10p), in line with full-year dividend target.

·     Full-year dividend target guidance for the year ending 31 March 2026 remains at 8.43p per Ordinary Share (31 March 2025: 8.43p).

·    The full year dividend target per Ordinary Share is forecast to be covered in a range of 1.1x – 1.3x by earnings post-debt amortisation.

·     Since inception the Company has declared total Ordinary Share dividends of £407m.

·     As at 20 August 2025, the Company offers an attractive dividend yield of c.11%

NESF

Pillar #3 – Stock Buybacks

Share Buyback Programme:

·      As at 30 June 2025, the Company had purchased 15,621,142 Ordinary Shares for a total consideration of

       £11.5m through its up to £20m Share Buyback Programme, producing a total aggregate NAV uplift of 0.5p per Ordinary Share (0.0p during the period).  All purchased Ordinary Shares are currently being held in the Company’s treasury account.

Solar investor NextEnergy Solar Fund  will leave the 250 index. All changes will take effect from the start of trading on September 22.

IF the dividend isn’t increased or cut and NESF isn’t taken over, you should receive your capital back in around 5 years.