Do investors who speculate heavily in AI still remember the pain of digital currency and SPAC?

The latest analysis article by The Wall Street Journal states that investors considering investing in the AI field need to have a bit of real intelligence first. AI hype triggered by ChatGPT is rapidly becoming a mini foam. You don't need to look back too far in history to know how quickly betting on these popular new themes can freeze your investment portfolio.

Nvidia, the "selling shovel king of the AI gold rush era," has surged nearly 170% this year, with a market value exceeding the trillion dollar mark. Based on the forward P/E ratio of the next 12 months, it is as high as 44 times, and this is after analysts have raised their profit expectations.

In response, the Wall Street Journal analyzed that Nvidia not only needs to win from the AI boom, but also needs to win a very, very big victory, just to prove that the existing valuation is reasonable.

On Friday, Edmondde Rothschild, CIO of NVIDIA's long-term asset management firm, echoed this point, revealing that its NVIDIA holdings are much smaller now. Given the high valuation of AI, it is becoming increasingly uncertain whether it will increase its holdings in AI technology stocks. If the valuation continues to grow, it will be more cautious. Michael Hartnett, a strategist of Bank of America, known as the most prospective analyst on Wall Street, also said that the field of artificial intelligence was in the "baby foam" period.

Other AI concept stocks are also exceptionally popular, among which C3.ai is definitely worth mentioning. The stock has surged by about 180% this year, with the highest increase exceeding 290% at one point. The decline from the high point occurred in recent trading days, as the company's financial report showed that the revenue guidance for the next fiscal year was weaker than expected.

C3. ai is a typical theme stock listed company.It has undergone its fourth transformation, with previous attempts at business models in carbon emissions, energy management, and the Internet of Things. Each transformation has changed the company name before shifting to artificial intelligence. Investors focused on growth will like it because its revenue has tripled within four years. However, upon closer examination of the profit account, in April 2019 before the IPO, the company suffered a loss of 36 cents for every $1 sold. However, by 2022, for every $1 sold, there was a loss of 1 dollar, which is a typical loss making call. The true profitability of C3.ai cannot be confirmed at all.

According to FactSet data, the robot and AI concept ETFBOTZ have ranked 19th among various ETFs in terms of capital inflows in the past month, although the ETF has not even entered the top 100 by size.Many of the targets in this ETF even invest in robot concepts rather than AI concepts.Its largest position is NVIDIA, and its best-performing constituent stock is C3.ai.

Analysis has pointed out that due to the expectation that the US economy will fall into recession, the funding situation is not loose, and there is currently a lack of suitable investment targets, leading to a surge in technology stocks boosted by ChatGPT, abnormal speculation in AI concept stocks at the C level of the market, and some stocks experiencing drum beating and fancy soaring. Currently, the Nasdaq 100 Index is at a historical high relative to the Russell 2000 Small Cap Index.

It should be noted that this is not the first time AI or similar concepts have been hyped up. In addition to the well-known Internet foam in 2000, there was also speculation on AI concept stocks in 2010. At that time, it was reported that IBM's Watson system could defeat humans in the Q&A program "On the brink of danger". As Watson continued to win competitions and enter commercial use in 2011, IBM's stock price soared, but shortly thereafter, IBM's stock price fell by more than one-third from its peak at that time.

The Wall Street Journal pointed out that this round of AI has ignited the public's imagination in a way that previous breakthroughs in artificial intelligence did not have. The hype cycle may eventually reach a point where artificial intelligence is obvious to consumers, rather than just being limited to behind the scenes.

However, the current AI investment, which far exceeds reasonable valuations and concept stocks like Feitian, is likely to be another repeat of history. The Internet foam more than 20 years ago, as well as the 3D printing, clean technology, cryptocurrency, marijuana shares and SPAC, which have been popular in recent years, are emerging in an endless stream of small foam, seeing him rise and fall.It can be certain that some investors are profitable, and many companies may increase productivity. But it can also be confirmed that not all current hype targets will become winners.

The Wall Street Journal finally listed the performance of funds that rely on AI stock selection, saying not to have too much hope for it. The oldest among them is AIEQ, which has been using IBM's Watson since 2017. Since its launch, it has had a return on dividends of 34%, while the S&P 500 Index has a return of 82% during the same period. It is also such an AI stock selection ETF that it has reduced its holdings in NVIDIA.