JPMorgan Warns AI Stocks Resemble Peak of Internet Bubble
JPMorgan points out that current AI-related stocks show signals similar to the peak of the 2000 internet bubble.
Strategist Jason Hunter observes a divergence in chip stocks and mega cloud computing companies, akin to the trends of telecom equipment suppliers and capital expenditures in 1999-2000.
Another strategist, David Kelly, calculates that the market capitalization of U.S. companies has exceeded 400% of GDP, far higher than the 204% at the peak in 2000.
The Philadelphia Semiconductor Index has surged this year, while some AI capital expenditure giants have shown weak stock performance.
Concerns are rising about the sustainability of AI capital expenditures and the pace of returns.
Funds are flowing divergently from AI-related hardware and software sectors, increasing the risk of event-driven valuation reassessment, putting pressure on high-valuation tech stocks, while defensive and non-AI sectors benefit relatively.
Source: Public Information
ABAB AI Insight
JPMorgan has repeatedly compared the current AI craze to 2000 in client reports, previously indicating that the concentration of top stocks is nearing historical peaks. This time, the focus is on the price divergence between hardware and expenditure, continuing its monitoring of bubble signals.
The divergence occurs during a phase of high capital expenditures while some returns have yet to materialize, aiming to remind investors to pay attention to the second derivative (slowing growth) rather than absolute levels, strategically using historical analogies to reduce position risk.
Similar to the rapid correction after the parabolic rise of fiber optics and telecom equipment stocks at the end of 1999, we are currently in a window of observation where AI infrastructure enthusiasm and commercialization pace are misaligned.
Essentially, this serves as a warning before a transfer of pricing power. The market concentrates high growth expectations on a few segments, reflecting supply-demand and return uncertainties through relative performance divergence.
ABAB News · Law of Cognition
Hardware leading and expenditure lagging is a common precursor to bubbles.
Extreme values of market capitalization relative to GDP are never a good sign.
History does not repeat itself, but it rhymes with the same divergence.