A veteran predicts that a sharp reset is coming for AI stocks, saying spending trends have reached stratospheric levels.
In a Bloomberg Television interview, Mark Mobius, who grew Templeton’s assets from $100 million to over $50 billion, warns that the massive spending of AI giants is getting out of hand.
“If you look at the AI space, it’s a lot of froth. And we expect there to be a big correction in these companies that are emphasizing AI [because they are] spending trillions of dollars in AI improvements and infrastructure. There’s got to be a correction because some of the numbers are just out of sight…
I think some of the infrastructure spending and other spending on AI is probably excessive.”
He expects the pullback could drag AI stocks down to bear-market levels.
“I mean, when I look at a correction, I look at 30% down, 30, 40%. That will happen.”
But he emphasizes that the long-term secular case remains intact, warning investors not to mistake valuation excess for a collapse in the underlying technology trend. He also says he believes the bear market will be short-lived.
“That’s the wonderful thing about these bear markets. The bear markets are much shorter in duration than the bull markets. And that’s the reason why long-term investors, if they hang in there, tend to do fine. But I think we’ve got to be ready for a big pullback. When it’s going to happen, nobody knows…”
Mobius also says he will smash the buy button if the correction comes to pass.
“I’d love to see a pullback of 30, 40%, [and] I will be in there with both arms and legs. We’ll be buying a lot.”
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