JPMorgan says the AI investment cycle is not a bubble but a natural phase of innovation, where early “circular” deals help new technologies reach critical scale.
In a new CNBC interview, JPMorgan Asset Management global market strategist Meera Pandit says the circular deals involving AI giants OpenAI, Nvidia, Oracle and others are what’s needed at this juncture to push the industry to the next phase of growth.
“What you tend to see with some of these heavy innovation cycles is in the early stages, some of these circular deals are almost necessary to get this technology to exit velocity. While I do pause a little bit at the circularity that you’re seeing in terms of deals, I also understand that it can be part and parcel of how this innovation takes place.”
Looking closer at tech bubble calls, Pandit says investors should expect cycles of acceleration and cooling as capital expenditures and chip demand move through natural economic rhythms
“AI is not a bubble. It’s not a boom. It’s a boom-and-bust cycle. It is inherently cyclical in that if you think about some of these ebbs and flows in supply and demand, there’s going to be some cyclicality to this AI, even if the broader trend is more and more entrenchment.”
Pandit adds that the current stage of the cycle still favors long-term investors.
“We have to watch things like adoption. We have to watch things like how companies are financing this capital spend. But inherently, there is a chip cycle. There is a CapEx cycle. If there is economic weakening down the line, it’s not something we see immediately, but down the line, that can impact some of the downstream adopters and therefore change some of the economics around this.
So they’re all things to watch. But what I would say is there are going to be ebbs and flows in this AI trade, even if the broader trend is moving stronger, moving higher.”
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