"AI developers' ambitious spending plans and rapid user adoption indicate the global rally in their stocks will persist despite bubble concerns, according to Fidelity International. The recent downturn in global semiconductor stocks, ahead of Nvidia Corp.'s closely watched earnings later this week, is likely temporary, according to Joseph Zhang, portfolio manager at Fidelity International. Unless AI capital spending or usage slows, he expects a rebound following such a correction."
"It's still in the early stage of the party, said Zhang, who co-manages over $10 billion of assets at Fidelity. It will be wrong to jump off the party too early. The view reflects staunch optimism among a group of investors, even as concerns over stretched valuations spurred a selloff among prominent artificial intelligence stocks. Bulls see the boom as a onceinageneration tech revolution, making it harder to dismiss as just another stock trend. Heavyweight commitments such as Jeff Bezos' new AI venture are also helping."
"Few have a clear grasp of AI's potential and investors don't yet understand all its capabilities, he said, adding that it's too early to proclaim it a bubble. For those who shrug off AI bubble concerns, signs of a genuine slowdown such as weaker capex, lower utilization or a tech breakthrough reducing demand for data centers and chips haven't emerged yet."
"Earnings at AI-related firms and memory chip prices continue to climb, and rising criticism of circular investment among AI companies overlooks the view that the AI revolution requires collaboration to build a new ecosystem, according to Fidelity's Zhang. Over the medium term, we are quite positive on overall tech and AI cycles, he said. Still, if stock losses further pile up, such confidence will be tested."
Ambitious capital spending plans and rapid user adoption support expectations that an AI-driven rally in semiconductor and tech stocks will persist despite concerns over stretched valuations. Recent downturns in semiconductor shares are viewed as likely temporary unless AI capital expenditure or usage materially slows. No clear indicators of a genuine slowdown — weaker capex, lower utilization, or breakthroughs reducing demand for data centers and chips — have emerged. Earnings at AI-related firms and memory chip prices are rising. Criticism of circular investment overlooks the collaboration needed to build an AI ecosystem. Continued severe losses would test current investor optimism.
Read at www.mercurynews.com
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