"Is Sam Altman Right About the 'AI Stock Bubble'?"

PER of Leading AI Magnificent 7 Surpasses S&P 500
Magnificent 7's Revenue Growth Declines for Over a Year, Now at Average Levels
"Funds May Shift to Undervalued Stocks When Rates Are Cut"

Yonhap News Agency

Not long ago, Sam Altman, CEO of OpenAI, warned of an overheating in artificial intelligence (AI) stocks. As the creator of ChatGPT and a leading figure in the AI era, his remarks drew significant attention in the stock market. He noted that the current AI market is reminiscent of the past dot-com bubble. On August 25, DB Securities released a report titled "The AI Bubble Controversy Raised by Sam Altman," stating, "There is reason to take Altman's comments seriously, especially as the U.S. is approaching a period of interest rate cuts."

Similarities and Differences with the Dot-Com Bubble

Those who agree with Sam Altman's view point to the current stock market valuations, which resemble those seen during the dot-com bubble over 20 years ago. The current S&P 500 price-to-earnings ratio (PER) stands at 22, similar to the 25 recorded just before the dot-com bubble burst. However, opponents argue that, unlike during the dot-com bubble when many related companies failed to generate profits, today's leading AI industry players-the Magnificent 7 (Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta, and Tesla)-are all profitable, and this is their main argument.

Currently, the Magnificent 7's PER is 28, higher than the S&P 500 average. While the Magnificent 7 continue to post solid profits, their revenue growth rate has declined for over a year and has now fallen to the level of ordinary companies. The Magnificent 7's estimated revenue growth rates for the third and fourth quarters of 2025 are 14.5% and 13.6% year-on-year, respectively, which are not significantly different from other companies.

When Will the AI Bubble Burst?

While the AI bubble may eventually burst, the question is when. Kang Hyunki, a strategist at DB Securities, stated, "We need to pay close attention to the second half of this year, when a U.S. interest rate cut could occur," explaining, "If the popularity of U.S. Treasury bonds rises in line with a rate cut, capital could flow into the bond market, causing the stock market to contract."

Some argue that interest rate cuts create a favorable environment for stock price increases. However, strategist Kang Hyunki analyzed, "Such a belief holds true when rate cuts precede economic slowdowns, but if rate cuts follow an economic downturn, they do not immediately boost stock prices. Instead, during such periods, stock prices tend to decline in response to the visible economic slowdown, while bonds-being at the opposite end-strengthen and absorb market liquidity."

He added, "As U.S. interest rate cuts proceed and capital flows into the bond market, investors in the stock market will start to question when the AI bubble might shake the market. Since the Magnificent 7's revenue growth rates are not significantly different from those of ordinary companies, we may see a shift in investment funds toward undervalued companies that deliver more solid performance with similar growth rates."

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