AI stocks fall 16% in a week: what analysts say about the bubble

Shares of artificial intelligence companies have fallen by roughly 16 percent over the past week. According to BH Securities chief economist Štěpán Křeček, the sector is in a deep correction and within arm's reach of a bear market. Experts, however, do not believe the AI boom is over.

The market starts doubting the debt

Křeček says investors are gradually beginning to wonder whether every AI investment will pay off in the long run. The key question is whether the financing of these projects could become a serious threat in the future.

The economist sees the greatest risk in smaller companies that are not yet profitable and fund rapid expansion with debt. One example is the AI data-center operator CoreWeave, whose bond yield has climbed to about 15 percent. “Such expensive financing can noticeably complicate further growth,” Křeček noted.

CoreWeave shares have dropped sharply. Two weeks ago they traded at almost 92 dollars apiece, and on Monday they closed at 61 dollars — more than a third lower.

Demand for chips remains high

The big tech giants — Meta, Google, Amazon and Microsoft — are in a different position: they can pay for AI investment with money earned by their other businesses. Many small companies that have yet to turn a profit, on the other hand, face rising interest rates on borrowed money.

In Křeček's view, there are no signs yet that the boom is over. Makers of chips and components for data centers continue to report exceptionally high demand, and part of their capacity is booked up to 2028. “So I don't think this is the start of the AI bubble bursting,” the economist said.

A sobering-up, not a crash

Purple Trading analyst Petr Lajsek takes a similar view. He describes the current sell-off as more of a sobering-up after a period when investors valued the technology's potential as if it had already turned into real profit. Some stocks remain well in the black since the start of the year even after the drop: Nvidia is up more than 13 percent and AMD more than 130.

At the same time, investors are watching much more closely how much companies put into AI and how quickly that money will come back. Lajsek believes AI development will not stop, but its pace and the way it is financed may change. Companies will have to prove more convincingly that expensive models and data centers can generate steady income. The technology may become one of the most important of our era, but the shares of some of its beneficiaries may well be overvalued.

Source: novinky.cz