Park Sun-kyu, CEO of Blackboard Asset Management, believes that the current surge in artificial intelligence (AI) investments signals the beginning of a significant market rally, rather than a fleeting bubble akin to the late 1990s. Speaking on the state of the AI market, Park emphasized the necessity of stable earnings management and prudent asset allocation, especially in a climate where market winners and losers are becoming increasingly defined.
“The AI rally is close to the starting point of a full-fledged rise,” he stated, comparing the present market dynamics to 1997, the onset of the dot-com boom, rather than the peak bubble of 1999. He noted that while the dot-com bubble experienced exponential growth from 1997 to 1999, it ultimately collapsed in 2000, largely due to a raise in interest rates by the U.S. Federal Reserve that caused liquidity to dry up.
Park remarked that current conditions are markedly different, arguing that a liquidity shock would be necessary for the AI bubble to burst. “Unless there is a situation to raise interest rates again until at least next year, it is unlikely to collapse all at once,” he said. This viewpoint comes amidst ongoing discussions about the Federal Reserve’s policies, which are currently aimed at stabilizing the economy.
Analyzing AI stock performance, Park indicated that the pressure on valuations is easing. He noted that even if a company’s expected earnings per share (EPS) rises by 17% this year—a significant drop from last year’s 25 times higher expectations—the valuation would still fall to 20 times. “As profits increase, stock prices are entering a section where they do not look expensive,” he explained, suggesting that market sentiment is turning more optimistic.
However, Park cautioned against universal expectations of profit in the AI sector, stating, “If AI develops, expectations that everyone will make money will be broken in earnest starting this year.” He pointed out that the market is already differentiating winners from losers as it assesses which companies will effectively translate AI advancements into tangible financial success. The recent rise in stock prices of memory semiconductor companies, he noted, is a direct reflection of this market judgment.
As investors navigate this evolving landscape, Park underscored the importance of maintaining stable growth through strategic asset allocation. “The importance of stable growth through asset allocation has increased along with selecting winners of AI competition,” he advised, emphasizing a cautious yet progressive approach to investment in the AI sector.
Looking ahead, the trajectory of AI investments will likely continue to influence broader financial markets, as the competition between leading companies in the field intensifies. Stakeholders will be watching closely for indicators of market stability and the Federal Reserve’s interest rate policies, which could further shape the landscape of AI investment in the coming year.
For more insights on AI and market trends, visit OpenAI and Nvidia for detailed information on leading technologies.
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