[Reporter’s Notebook] ChatGPT Craze and Memories of the Dot-Com Bubble

"Market participants often fail to recognize a 'bubble.' They only realize it after it bursts, saying, 'Ah, that was a bubble.'

This is a memorable remark from a recent conversation with a capital market industry insider about 'money-making stories.' The craze over theme stocks in the KOSDAQ market, represented by ChatGPT, is the reason. From the beginning of this year until the 27th, the KOSDAQ market rose by 14.85%, about twice the KOSPI's increase of 7.43%. It might seem like spring is coming again for KOSDAQ, but a closer look reveals more concerns than hopes.

The frenzy in the KOSDAQ market has been driven by ChatGPT. Konan Technology, considered a leading company of ChatGPT, surged an astonishing 415% during this period. The problem is that the stock price has risen excessively based solely on expectations without fundamental support. Konan Technology recorded an operating loss of 4.4 billion KRW last year, turning to a deficit, yet its price-to-earnings ratio (PER) stands at 244.9 times. This is seven times higher than Tesla's PER, which is around 30 to 40 times.

Watching the current KOSDAQ, is it an overreaction to recall the 'dot-com bubble' of the 2000s? In 1996, the U.S. NASDAQ index surpassed 1,300 points, rising rapidly, and the KOSDAQ market was launched in Korea. Ahead of the new millennium, fueled by expectations for advanced technology development, the KOSDAQ index reached an all-time high of 2,834.40 in March 2000. Irrational optimism dominated the market, and just one month after hitting the peak, the KOSDAQ index plunged more than 10%, signaling the 'starting gun' of the bubble burst. Less than a year later, at the end of 2000, the KOSDAQ index closed at 525, down 81.5% from its all-time high. The stocks that had heated the market disappeared as they went through delisting procedures.

History is said to repeat itself. The capital market is no exception. A remark by Alan Greenspan, then Chairman of the U.S. Federal Reserve (Fed), during the dot-com bubble era resonates heavily: "How can we know when irrational exuberance has unduly escalated asset values, creating a bubble?"

This content was produced with the assistance of AI translation services.