Institutional investors at Fidelity International and Allianz Global Investors are pushing back against fears that the current artificial intelligence‑driven stock rally is overdone — instead, they argue, it still has significant room to run.
AI developers have made it clear that they intend to significantly invest in the industry as more individuals begin to use their products. A Portfolio Manager and Client Solutions Investment Director at Fidelity International, Joseph Zhang, expressed his belief that the recent decline experienced in global semiconductor stocks is likely a short-term change.
He also predicted that a bounce back will occur unless the use or spending on AI decreases. “The party is still just getting started,” said Zhang, adding that, “It would be a mistake to leave the party too soon.”
Notably, reports from sources indicated that the Portfolio Manager was responsible for managing more than $10 billion in assets at Fidelity.
Investors raise questions regarding the excitement around AI
Analysts conducted research and discovered that market fears concerning a bubble have prompted some investors, such as Japanese multinational conglomerate SoftBank Group Corp., and Peter Thiel, who initially drew attention for his innovations in banking and financing startups, to withdraw their investments.
However, the perspective shared by fund managers at Fidelity International and Allianz Global Investors highlights that optimistic investors remain composed, especially with substantial investments like Jeff Bezos’ new AI initiative. Supporters backed this claim, noting that they believe this growth represents a rare tech revolution, making it difficult to dismiss as just another passing trend.
Hartwig Kos, head of growth multi-asset at Allianz Global Investors, also weighed in on the topic of discussion. Kos stated that few people really grasp the capabilities of AI at this point. Therefore, according to him, it is too early to conclude that it is a bubble.
Fidelity’s Zhang, on the other hand, asserted that there are no clear indications of a real slowdown in AI, such as reduced usage, lowered capital spending, or a technological breakthrough that could lessen the demand for chips and data centers.
He further pointed out that yields from AI firms and prices of memory chips continue to escalate. “We feel quite optimistic about the overall technology and AI trends in the medium term,” the director at Fidelity added.
Meanwhile, after six months of increases, reports stated investors in the US enjoyed some profit gains from semiconductor stocks in November. This news followed the 9.4% drop in the US chip index this month. The index was on track for its poor performance since March, while that of a Bloomberg index tracking Asian counterparts decreased by about 7.3%. This situation prompted investors to raise questions about whether the excitement surrounding AI is waning.
To address these concerns, Mark Boulton, lead portfolio manager at Pictet Asset Management, advised investors to adjust their expectations for AI, as they might become overly enthusiastic about the technology, leading to disappointment.
Analysts noted that even before SoftBank and Thiel intervened in the situation, signs resembling those from the dot-com crash began to appear. According to them, to stay positive about AI, one will need to ignore such warning signs.
Nvidia’s earnings report ignites debate among individuals
The so-called “Magnificent Seven” — a group of major US tech companies like Nvidia, Microsoft Corp., and Apple Inc. — represent a large portion of the S&P 500’s growth. Earlier this month, Nvidia was valued higher than the total stock markets of Italy, Spain, the UAE, and the Netherlands combined.
Sources have observed that investing in this sector in Asia may require even greater trust in the technology to handle the region’s specific challenges, which include trade issues and China’s unstable economy.
According to Zhang, part of the recent selling is due to hedging actions taken before Nvidia’s earnings report. Investors may have purchased put options for the security, which could be impacting the market, he explained.
The director at Fidelity also predicted that if Nvidia’s results are strong, investors will exit their hedges, and the market is likely to bounce back. Currently, the global leader in AI trades at 29 times its earnings expected over the next year.
However, Zhang thinks its valuation seems fair considering its strong growth. Additionally, its main Asian suppliers, Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., appear to be even more affordable.
“As long as these core factors remain unchanged, corrections driven by liquidity often present buying opportunities,” he stated.
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