Major Investor Dumps All Shares in Canada’s ‘Big Six’ Banks Over AI Bubble Fears
A prominent investor has sold all their shares in Canada’s ‘Big Six’ banks, including Bank of Montreal (BMO). The move comes amid concerns over overvaluation and broader market risks, particularly around what they describe as an emerging 'AI bubble'. The investor now holds over 35% of their portfolio in cash, finding few attractive alternatives in the stock market today.
The investor’s decision affects Toronto Dominion (TD), Scotiabank (BNS), and BMO, the fourth-largest of Canada’s major banks. BMO, with 60% of its business in Canada and 40% in the U.S., operates heavily in the Midwest and is expanding into California. Unlike some peers, it leans more toward commercial lending, focusing on medium and small loans under $100 million CAD.
The investor sees BMO’s fair value at around $170 CAD per share but has set a price target of $140, factoring in current overvaluation and risks. These include rising U.S. commercial lending costs and potential tariffs. Despite these concerns, they maintain a Hold rating on BMO as of November 2025, citing an acceptable risk-reward balance for a 15% annualised return.
Broader market worries also play a role. The investor warns of a possible decline similar to past crashes like the dot-com bubble, the 2008 financial crisis, or the COVID-19 downturn. They argue that Canadian banks, including BMO, remain significantly overvalued in this uncertain climate.
The investor’s latest analysis on BMO did not outperform the market but still delivered a steady return with a decent yield. With a large cash position now earning interest, they see limited opportunities worth pursuing in the stock market. The decision reflects both caution about bank valuations and wider fears of an impending market correction.
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