"Early Stages of AI Bubble... Rising Investor Caution"

Although the U.S. stock market is reaching record highs driven by optimism over artificial intelligence (AI) and expectations of interest rate cuts, analysts in the securities industry have noted that heightened investor caution may indicate the early stages of an AI bubble.

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On September 11, Bang Inseong, a researcher at Eugene Investment & Securities, stated in a report titled "Are We at the Beginning of a Bubble?" that "While the U.S. stock market continues to hit record highs due to AI and expectations of interest rate cuts, investor sentiment remains cautious," offering this analysis.

In August, the U.S. Composite Leading Indicator from the Organisation for Economic Co-operation and Development (OECD) rose by 0.06 points from the previous month to 100.4 points, marking four consecutive months of recovery. Continued economic recovery and expectations of interest rate cuts have pushed the S&P 500 and Nasdaq to all-time highs. However, the Sentix U.S. Economic Sentiment Index for September deteriorated to -10.8, down from -7.8 the previous month.

Researcher Bang stated, "The rise in stock prices is not translating into improved investor sentiment," and added, "Just as investors showed negative sentiment during the economic boom of 2006-2007, the current cautious mood serves as both evidence that the market is not overheated and a dual signal indicating the risk of a 'sharp decline after a rally.'"

In particular, the spread of AI is fueling concerns about a bubble. Bang noted, "During the second-quarter earnings conference calls of S&P 500 companies, AI was mentioned 287 times-about twice the five-year average of 124 mentions. In 10 out of 11 sectors, the number of AI mentions increased in the second quarter compared to the first, with the largest increases seen in the financial, industrial, and consumer sectors."

He further pointed out, "States such as California and Washington, where many AI companies are concentrated, are experiencing relatively high or volatile unemployment rates," emphasizing, "AI is a key variable for both the market and employment. The spread of AI is creating a mismatch between job openings and actual employment."

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