The market's FOMO-driven rally is unsustainable and most AI stocks are still bottoming, CIO says

• The stock market's red-hot rally has mostly been driven by fear of missing out, Main Street Research said.
• The firm pointed to record-low stock market volatility, a sign investors are chasing the market.
• But most AI stocks are still bottoming, the research firm warned.

The red-hot rally in stocks is mostly being driven by FOMO, and the excitement for AI won't be enough to stop most artificial intelligence stocks from bottoming, according to Main Street Research chief investment officer James Demmert.

In a note on Monday, he pointed to unusually low volatility in the market as a sign that investors are trying to chase the momentum in stocks. In fact, the stock market's volatility gauge is now hovering near a record-low, indicating that heightened bullishness from investors is running the show.