AI Chip Craze Raises Bubble Concerns in Tech Stocks

The current surge in demand for AI-powered chatbots and high-performance graphics processing units, crucial for training these chatbots on powerful computers, has led to an AI chip frenzy. Investors have eagerly invested in certain stocks, raising concerns about a potential bubble.

  • Jeremy Siegel, a well-known economist and professor at Wharton, remains optimistic about a potential Big Tech boom driven by artificial intelligence, despite concerns of a possible bubble forming.
  • During an interview on CNBC's "Street Signs Asia," Siegel expressed his opinion, stating, "It's not a bubble yet."
  • Siegel explained, "First, there was excitement about AI, and Nvidia further fueled that excitement with outstanding earnings. That's a double push."

Momentum And Fair Value

Contrary to Siegel's perspective, economist David Rosenberg has warned that the current AI boom may collapse similarly to the dot-com stocks in the late 1990s. The dot-com bubble burst when funding dried up after the widespread adoption of the internet and the influx of venture capital into internet-based companies, particularly startups lacking a proven track record.

  • Shares of Nvidia experienced a remarkable 25% rally in earlier weeks following the company's release of better-than-expected financial results in the recent quarter.
  • The skyrocketing demand for Nvidia chips used in AI applications propelled the company's stock to an all-time high, resulting in a market capitalization of a little above $1 trillion.
  • During the earnings call, Nvidia CEO Jensen Huang mentioned the "surging demand" for the company's data center products. Year-to-date, Nvidia shares have surged by an impressive +165%.

Siegel commented on the situation, stating, "[In the] long term, I would say that Nvidia shares are probably slightly overvalued. However, in the short term, we know that momentum can drive stock prices far beyond their fundamental value, and it is impossible to predict how high they might go."

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. Please note that the writer of this article is not registered as a financial advisor.

Credits

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