A senior strategist at JPMorgan urges AI bubble callers to avoid making the same mistake that stock market bears made during the dot-com mania in the 1990s.
Stephanie Aliaga, global market strategist at JPMorgan Asset Management, says the AI trade has surged for years and is now entering a new phase marked by scrutiny, selectivity and rotation.
She notes that the slowdown is not a sign of fragility but a healthy move, suggesting that investors are adjusting to the enormous scale of spending and the high stakes around emerging AI winners.
“I think it’s quite healthy. We’ve seen that the AI trade has delivered enormous returns for markets over the last few years. And we’re I think all kind of experiencing the sigh of relief or this exhale… We have moved from a rising tide lifting all boats to more choppier waters and investors are being far more scrutinizing when it comes to how much is being spent, the quality of those investments… So I think it’s quite healthy that we’re focusing on selectivity. I mean, this is what you want to see to prevent a dotcom bubble.”
Aliaga says the spending itself is not excessive when measured against the revenue growth of the largest technology firms. She views the uptick in debt issuance as normal for multi-year data center projects rather than a sign of overextension.
“Just like Cartier is not that expensive for a billionaire, when looking at these capex relative to the sales from these companies relative to their current revenue growth, which has also grown significantly, it is actually not that extreme.”
The bigger risk, she notes, belongs to investors who are bearish on the AI trade. That mistake defined the dot-com cycle and left cautious traders with years of underperformance despite correctly forecasting the crash.
“We also don’t want to be out of the market. And that’s another thing that we’re trying to talk to clients about because even when you call a bubble correctly, if you weren’t in the market from 1995 to 1999, you would have missed out on over 400% of total return in the Nasdaq. You’re locked in years of underperformance. So when it comes to US equity markets today, we don’t see that real risk of a systemic bubble. But we do see a real opportunity to just make sure that portfolios are built for resiliency, and they’re also built to take advantage of how this wave continues to evolve.”
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