Source: Global Times
The rapid rise of generative AI (artificial intelligence) has set off a boom on Wall Street, and AI concept stocks have soared. Represented by the AI computing power leader NVIDIA, the short-term sharp surge in market value of some companies has triggered a debate on whether there is a bubble in AI. In this regard, many analysts issued a "bubble" warning, worried about repeating the mistakes of the Internet bubble at the end of the twentieth century, but some relevant experts believe that in this boom, there is no bubble in real AI, and AI will promote the prosperity of technology stocks.
The "first driving force" for U.S. stocks to rise
Last week, NVIDIA announced its first quarter 2023 results, and the overall results exceeded market expectations. On the 25th Eastern time, NVIDIA's stock price was pushed up by the surge of funds, soaring 24%, and the market value increased by $184 billion a day, equivalent to a market value of one and a half Intels, and created a new record for the one-day market value rise in the history of US stocks. At present, NVIDIA's market value is only a stone's throw away from $1 trillion, and it is striding towards the first echelon of US technology stocks composed of Apple, Microsoft, Amazon, Alphabet and so on.
The sharp rise in NVIDIA's stock price is only the epitome of this wave of AI being sought after by capital. According to the US "Wall Street Journal" reported on the 29th, up to now, the stock price of Microsoft, which has invested heavily in AI, has risen by 39% this year, and the shares of Apple, Google's parent company Alphabet and Amazon have risen by more than 35%. A report by Societe Generale said that the first driving force for the rise in the US stock market this year was artificial intelligence, and this boom contributed to the S&P 500's most significant gain this year. The S&P 500 is made up of stocks of the 500 largest companies by market capitalization in the U.S. and is considered to reflect the overall performance of the U.S. stock market. Without AI concept stocks, the S&P 500 would be down 2 percent this year instead of up 8 percent, the report said.
In the Hong Kong stock market, Baidu jumped 6% during the session this week, and finally closed with a gain of 2.75%. According to Bloomberg, Baidu will soon launch the latest version of its large-language model "Wen Xin Yiyan". If the latest version performs well, it may add momentum to the company's stock price, riding on the unexpected strong global AI wind of NVIDIA's performance. In addition to Baidu, other AI concept stocks also rose en masse on Monday, with SenseTime up about 4% and Meitu up 2%.
According to market agency statistics, in the A-share market, AI chip-related stocks rose by 22.3% at their highest point this year, while the "AI+ concept" related sectors rose by more than 50%, becoming the main line of market growth in A-shares this year.
"Bubble" worries
In the huge gains accumulated by AI, the market seems to smell the Internet at the end of the twentieth century, and the subsequent bursting of the bubble. The market is beginning to question whether AI will be another bubble.
The US business news website "Market Watch" reported on the 29th that the market's feverish pursuit of artificial intelligence may lead to a "bubble". The report also quoted an analyst as saying that large technology companies have entered the market one after another, and they all want to get a piece of the pie. But the investment is huge, and the benefits are far away, which is why there may be a bubble in AI.
According to the US Consumer News and Business Channel (CNBC) reported on the 29th, Rosenberg, founder and president of Rosenberg Research, warned last Thursday that the investment boom set off by AI is reminiscent of the Internet bubble in the late 90s of the 20th century. He argues that the rapid rise in AI stocks bears a striking resemblance to the dot-com boom at the time, and that the S&P 500 now has a weight of 27 percent in tech, the level it was at the peak of the dot-com bubble in 2000, and it will soon burst in surprising fashion.
The Wall Street Journal reported on the 29th that Constein, CEO of a market consulting firm in the United States, said that in the long run, the rise of AI can not promote productivity improvement, and these gains will be at risk. Constance argues that "the overall economy is not showing the upward trend shown by these share prices, which makes me worried about their valuations." According to the report, Nvidia's current price-to-earnings ratio has reached 49 times, while Microsoft and Meta have also reached 31 times and 20 times, respectively. Driven by these technology stocks, the S&P 500 is trading at an average price-to-earnings ratio of 18.9 times, and the overall valuation is already above the 10-year average of 17.6.
European analysts are also warning of the risk of a "bubble". Germany's Bild newspaper reported last week that AI stocks currently dominate the stock market. Meta, Nvidia, etc. are the best performers, and everyone believes they will continue to climb, but experts warn against over-excitement. Fischer, the head of a German financial company, said: "It's definitely a bubble. He explained that AI pushed up the stock prices of tech giants, but now they are overvalued. He believes that the AI bubble could last a long time. This means that AI stocks may continue to rise along with the hype, but the risks are increasing and may suddenly fall at some point. "Only a few stocks pulled the entire market, but the masses did not participate in this upward movement at all." Fisher said.
Who would be a "naked swimmer"
However, some analysts believe that this boom is not necessarily a bubble. Citi's global strategy and macro team said on Friday that AI is not going to disappoint and that it will remain a driving force for U.S. stocks. Since AI is the subject of hype in U.S. mega-cap stocks, it reduces the risk of underperformance in the U.S. stock market.
Siegel, a professor of finance at the Wharton School of the University of Pennsylvania and a well-known economist, believes that "this is not a bubble", and AI will promote the boom of large technology stocks.
Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center of Zhejiang University International Business School, told the Global Times that AI has indeed brought changes, and it is understandable that the market value of related companies has risen. He believes that AI may bring some bubbles at the moment, but it is not serious. The market should focus on the bubbles in the stock prices of individual companies that have been hyped up by concepts.
Li Xunlei, chief economist of Zhongtai Securities, told the Global Times reporter in an interview on the 30th that the stock price reflects a market expectation, AI may currently trigger a scientific and technological revolution to improve social productivity, if the time is extended, the current stock price of AI may not have a bubble. Li Xunlei said, "After the Internet bubble burst at the end of the 20th century, the Internet industry really rose. This round of AI craze is the same, there is no bubble in real AI, and those hyped pseudo-AI companies are naked swimmers. ”
Since ChatGPT unveiled a new round of AI development last year, domestic and foreign giants have joined the competition. The commercialization of AI is accelerating, and a revolution sweeping the global technology field is kicking off. Li Xunlei believes that AI is a technological trend that will bring profound changes to the development of human society. The emergence of AI to increase productivity is its most important value. He said that both industrial development and the stock market need to go through the current "feverish" stage.