AI Bubble Talk Grows Louder as Wall Street Ignores the Real Risk: The Fed’s Next Move

If you’re looking for a market that’s forgotten how to price risk, look no further than the current AI trade. On February 2, 2026, the financial news cycle was full of hand-wringing about the ‘AI bubble’, Bradley Tusk of Tusk Ventures went on record saying the froth is starting to show. But the real story isn’t the AI hype machine. It’s the market’s collective amnesia about the Fed and what comes next. While everyone’s busy debating whether OpenAI can sustain its burn rate, the actual threat is hiding in plain sight: the Fed’s next chair, Kevin Warsh, and a central bank that’s about to be dragged into the political circus of an election year.

Let’s get the facts straight. AI stocks have been the only game in town for the last year, driving up the Nasdaq and making XLK the darling of every momentum desk. But as of February 2, XLK is frozen at $145.51, not a tick higher, not a tick lower, four prints in a row. This comes as the broader equity market is attempting a rebound, with US indexes flirting with record highs on the back of ‘positive data’ that nobody can actually see, because the jobs report is delayed again. Meanwhile, the Fed’s messaging is a mess. Raphael Bostic says maybe one or two cuts, but not this year. Trump, never one to keep quiet, says it’s ‘inappropriate’ to ask the new Fed chair to cut rates. The market is pricing in a soft landing, but the data is missing in action.

Here’s the context: the AI bubble narrative is getting louder, but the real risk is that the Fed is about to become a political football. Warsh is being told to keep the Fed out of politics, but with an election looming and inflation still sticky, that’s wishful thinking. The last time the Fed was this politicized, we saw wild swings in rates and equities. If you think the AI trade is crowded now, wait until the Fed gets dragged into the campaign mud.

The technicals are telling the story. XLK is stuck at $145.51, with resistance at $148.00 and support at $142.00. The 50-day moving average is flat, and RSI is at 52, neither overbought nor oversold. Momentum has dried up, and the options market is pricing in a 4% move over the next month, which is well below the average for the past year. This is a market waiting for a catalyst, but the real catalyst isn’t another AI press release. It’s the Fed, and the market isn’t ready.

Positioning is stretched. Hedge funds are max long AI and tech, and retail is chasing every dip. Systematic flows are still positive, but the pace is slowing. If the Fed surprises hawkish, or if the jobs data (when it finally arrives) shows inflation is still a problem, this trade unwinds fast. The risk isn’t that AI is a bubble, it’s that nobody is hedged for a Fed that has to slam on the brakes.

Strykr Watch

XLK is boxed in. The $145.51 level is the new center of gravity, with resistance at $148.00 and support at $142.00. The 50-day and 200-day moving averages are converging, which usually precedes a big move. RSI is neutral, and implied volatility is scraping the lows. If you’re looking for a breakout, watch for a close above $148.00, that’s your trigger for a run to $152.00. On the downside, a break below $142.00 opens the door to $138.00. But until the Fed blinks, expect more of the same: boredom punctuated by panic.

The risk is that the market is sleepwalking into a policy shock. If Warsh signals a hawkish pivot, or if inflation surprises to the upside, XLK could unwind in a hurry. The options market is cheap, but that’s because nobody believes the Fed will actually move. That’s your edge, if you think the market is wrong, this is the time to buy protection.

On the opportunity side, this is a textbook setup for a volatility play. Buy straddles or strangles, and wait for the catalyst. If you’re directional, long above $148.00 with a stop at $145.00 targets $152.00. Short below $142.00 with a stop at $144.00 targets $138.00. Just don’t get caught flat-footed when the Fed finally makes up its mind.

Strykr Take

The AI bubble talk is a sideshow. The real risk is the Fed, and the market isn’t ready. If you’re trading XLK or any tech proxy, hedge your bets. The next move will come from Washington, not Silicon Valley.

Strykr Pulse 56/100. The market is complacent, but the setup for a policy shock is real. Threat Level 3/5.