Is there a bubble danger in artificial intelligence stocks?

Artificial Intelligence Analysis from Nomura Asset Management

Japan's largest technology fund, Nomura Asset Management, emphasized that the rapid rise of AI-focused companies does not indicate a bubble formation. The fund's portfolio manager Yasuyuki Fukuda stated, "The artificial intelligence market is just entering its second phase. We are not in a bubble stage right now."

Outperformed Nasdaq with High Returns

As of November 6, Nomura’s Japan Information Electronics Stock Fund has attracted attention with a 49% return since the beginning of the year, outperforming the Nasdaq Composite Index. During the same period, the Topix Index gained 22%, while the Topix Electrical Devices Index achieved a 30% profit.

Difference Between the Technology Rally and the Dot-Com Era

Fukuda emphasized that the current technology rally should not be confused with the dot-com crash of the 2000s. At that time, many telecom companies were unable to generate income and struggled to secure financing due to lack of profitability, which triggered the market crash. However, today, firms like Meta, Google, and Amazon are creating a more solid investment groundwork by continuing infrastructure investments, supported by their substantial cash flows.

Nvidia's Historic Success

The global surge in AI demand has propelled Nvidia's market value above $5 trillion, reaching the highest company valuation in history. Additionally, more than a third of the weight of the S&P 500 Index consists of just seven major tech giants. While this situation raises concerns among some investors about “the market overheating,” Nomura points out that strong fundamental dynamics are behind this rise.