Is AI a Boom or a Bubble?

KlipC Report: The frenzy around artificial intelligence (AI) has cooled somewhat, with investors shifting their focus from hype-driven rallies back to fundamentals.

Andi D, a partner at KlipC, stated: "Recently, allegations about Nvidia’s 'record-breaking' Q2 earnings being potentially fabricated have been widely discussed on social media and investor forums. Its stock fell by about 3% for two consecutive days, and Nvidia’s poor performance also dragged down the chip sector benchmark."

It’s worth noting that Citigroup strategists previously predicted AI would have a broad impact on businesses within two years at the earliest, calling the technology a 'new growth driver' for the stock market. This prompted investors to flock in, seeking early beneficiaries. Chipmaker Nvidia became a prime example.

Will AI Become a Bubble?

Regarding this, Goldman Sachs analysts said: "The long-term positive trend of AI for the broader market remains unchanged, but stocks are now undergoing adjustments as the market seeks incremental information to sustain growth."

They also pointed out that early winners in the AI space have strong fundamentals, and their valuations are less extreme compared to stocks during previous rallies. This view counters concerns about an AI bubble forming.

However, other investment banks issued more cautious warnings, stating that AI cannot shield tech stocks from the impact of prolonged high interest rates. In their view, the bubble is nearing its peak.

Alex Su, an institutional member of KlipC, added: "Notably, even Nvidia—the sole survivor of market skepticism—couldn’t escape weakening investor sentiment. After reporting earnings that far exceeded expectations, its stock rose just 0.1% the next day. Over the following period, the stock declined by about 3% cumulatively."