JPMorgan Asset Management's Global Market Strategist Kerry Craig, speaking to Bloomberg TV, raised ongoing concerns about AI valuations, particularly after an AI-fueled forecast from Micron significantly surpassed expectations. His comments highlight a broader market worry regarding the sustainability of current AI-driven stock prices.
Adding to this sentiment, Robert Cohen, Portfolio Manager at DoubleLine Capital LP and Director of Global Developed Credit, draws parallels between the current AI investment boom and the late-1990s dot-com bubble. He notes that while investment-grade credit currently appears healthy, below-investment-grade issuance carries increasing risk. Cohen estimates a potential market correction related to AI excesses could occur closer to 2028 or 2029, rather than in the immediate future, predicting that Wall Street's tendency for excess will continue until a breaking point.
Credit heavyweights such as DoubleLine Capital LP and Oaktree Capital Management are proactively acquiring debt that is expected to perform well if the AI boom eventually leads to a credit bust. Cohen emphasizes that while bond prices and valuations are not yet deemed "frothy," he anticipates they will reach excessive levels in the coming months or years as technology companies continue to invest trillions of dollars into AI initiatives.
Nir Kaissar, a Bloomberg Opinion columnist, offers a slightly more optimistic view, suggesting that while many investors perceive the stock market as overvalued, the situation isn't dangerously high. He argues that the "equity risk premium," which measures the extra return stocks offer over bonds, is a tricky metric. After a sensible calculation, he believes the stock market is not flashing a severe warning, advising against a hasty shift from stocks to bonds.
Meanwhile, the substantial valuations surrounding AI companies are evident in events like the long-awaited SpaceX IPO, which tested capital market limits and paved the way for potential IPOs from OpenAI and Anthropic. Investor Steve Rattner highlighted the unprecedented scale of these valuations and fundraising, reflecting both immense optimism for AI's transformative economic potential and raising questions about market concentration and retail investor participation. Qualcomm also announced expectations for its data center chips to generate "billions" in revenue by 2027, further underscoring the high stakes and investment flowing into the AI sector.
