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Wharton professor and renowned economist Jeremy Siegel is optimistic about a big tech boom fueled by artificial intelligence despite fears of a bubble.
The AI chip craze, driven by demand for AI-powered chatbots and the high-powered GPUs — used to train these chatbots on supercomputers — has investors piled into certain stocks while raising some fears of a bubble.
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“It’s not a bubble yet,” he said. Siegel, Russell E. Professor of Finance. Palmer at the Wharton School of the University of Pennsylvania, on CNBC’s “Street Signs Asia” Monday. He noted that he was getting questions about whether this would lead to a repeat of the dot-com bubble of the late 1990s.
Known for his contrarian views, economist David Rosenberg predicted that the current artificial intelligence boom could crash like internet stocks in the late 1990s. The dot-com bubble burst when capital dried up following the massive adoption of the Internet and the proliferation of available investment capital in Internet-based companies, especially startups with no proven track record of success.
“First, there was excitement about AI and Nvidia validated that excitement with huge profits. That’s a double push,” said Siegel.
Nvidia shares rose 24% on Thursday after the company reported better-than-expected top-and-bottom earnings in the latest quarter, hitting an all-time high on surging demand for Nvidia chips used in artificial intelligence. The rally brought the chip maker’s market value to nearly $1 trillion.
Nvidia CEO Jensen Huang said during the earnings call that the company is seeing “a surge in demand” for its data center products. Nvidia shares are up 166% year-to-date.
“(In the) long term, I would say (Nvidia stock) is probably a little overvalued. But in the short term, we know that momentum can carry stocks well above their fundamental value, and no one can predict how high they will go,” Siegel said.
On Sunday, Nvidia announces a new class of large-memory AI-powered supercomputers Created to enable the development of next-generation giant models for generative AI language applications. The supercomputer powered by the Nvidia GH200 Grace Hopper Superchip is expected to provide about 500 times more memory than the previous generation Nvidia DGX A100 – introduced in 2020.
“Generative artificial intelligence, large language models, and recommendation systems are the digital engines of the modern economy,” Huang said in a press release. “The DGX GH200 AI supercomputer integrates Nvidia’s most advanced computing and networking technologies to push the boundaries of AI.”
Siegel of Wharton said AI stocks helped raise the bar Standard & Poor’s 500 And that he could become “the winner of the banking crisis.”
“As we all know the big eight or nine have captured all of the S&P 500 gains. This year, the other 490 have been flat or down. Yes, (The) Nasdaq was oversold in 2022 and it has bounced back but I think AI has pushed Big-cap technology stocks to the upside,” Siegel said.
“Remember, large-cap stocks of any kind, whether it’s technology or not, they don’t have to worry about credit conditions. Yes, they have to worry about interest rates to be sure. Credit conditions will affect small and medium-sized companies (companies),” Siegel said.
“Standard & Poor’s can actually become the winner of the banking crisis.”
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