BCA Chief on AI Frenzy Peak: Currently a Profitability Bubble, Not a Traditional Valuation Bubble; AI Demand Metrics to Signify Market Stage

BlockBeats News, May 30th – BCA Research's Chief Global Strategist, Peter Berezin, analyzed that the current AI bubble is primarily a profit bubble rather than a traditional valuation bubble. Unlike many past stock market bubbles characterized by a rapid increase in price-to-earnings (PE) ratios, the current AI-related sectors, especially the semiconductor sector, have relatively reasonable valuations. However, profit expectations are overly optimistic and unsustainable. Similar situations have occurred in history with real estate and banking sectors before the 2008 financial crisis: they had seemingly low PEs but relied on unsustainable profit surges. Once profits cannot be realized, the bubble bursts. Peter pointed out that semiconductor sales have been growing parabolically, and currently, AI demand indicators do not yet show an imminent bubble burst, but all bubbles eventually come to an end.

Peter emphasized that investors should not overly rely on Wall Street analysts' profit forecasts because stock prices often plummet significantly before profit expectations begin to decline. In past cycles, stock prices often peaked months before the forward EPS started to decline. If one waits until EPS declines to sell, they will suffer severe losses. The key to current investment is to proactively monitor changes in AI demand indicators.