Fidelity believes that the strong rally in artificial intelligence stocks will continue, supported by the massive spending plans of technology developers and the rapid adoption by users, despite growing warnings about a potential market bubble.
Joseph Chang, a portfolio manager at the firm, notes that the recent decline in global semiconductor stocks ahead of Nvidia’s earnings announcement may be temporary. He expects the market to recover unless signs of a slowdown in capital spending or real AI usage begin to emerge.
Chang, who oversees more than $10 billion in assets, believes the market is still in the early stages of the AI cycle and that it is premature to label the current surge as a bubble. His outlook aligns with a broader wave of optimism among investors who view the AI boom as a once-in-a-generation technological revolution rather than a passing trend.
Hartwig Kos of Allianz Global Investors shares the same sentiment, emphasizing that many still do not grasp the full scope of AI’s capabilities and that it is too early to talk about a market bubble. Clear indicators of a slowdown—such as weaker spending, reduced usage, or the emergence of alternative technologies that diminish demand for data centers and chips—have yet to appear.
Despite increasing criticism of what is known as “circular investing” among AI companies, Chang argues that building a functional AI ecosystem requires substantial cooperation across the industry. He adds that rising profits among AI-related companies and strong memory-chip pricing support continued medium-term growth.
However, the recent pullback in chip stocks is testing this optimism. After months of gains, U.S. semiconductor stocks saw notable profit-taking in November, with the U.S. chip index dropping around 9.4%, while a similar Bloomberg index for Asian chipmakers fell by more than 7%.
In contrast, Mark Bolton of Pictet Asset Management believes the market is overly optimistic about AI and that a correction in expectations will likely occur. Yong Jae Lee, also from Pictet, noted a decline in his earlier conviction that Asian semiconductor stocks could deliver strong gains similar to previous years.
Some analysts compare today’s dynamics to the early stages of the dot-com bubble, especially as the “Magnificent Seven” tech giants continue to dominate gains in the S&P 500. Nvidia alone recently surpassed the combined market value of several major global stock markets.
In Asia, stronger confidence in the sector’s long-term growth is increasingly necessary to offset additional headwinds such as trade tensions and China’s economic slowdown. Chang believes part of the recent selling pressure stems from investors hedging ahead of Nvidia’s results by purchasing put options, temporarily weighing on prices.
He expects a rebound if Nvidia’s results prove solid, as investors would likely unwind their hedging positions.
The global AI index is currently trading at a price-to-earnings multiple of 29 based on expected profits over the next 12 months—a level Chang considers reasonable given the strong growth trajectory. He also points out that Nvidia’s major suppliers in Asia, including TSMC and Samsung, remain relatively undervalued.
Chang concludes that as long as the sector’s fundamentals remain strong, liquidity-driven market corrections should generally be viewed as buying opportunities, given the structural momentum behind AI growth.
