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Commerzbank says US AI investment boom may persist despite correction risk
Commerzbank notes the S&P 500 is trading at 20 times expected next 12-month earnings, versus 25 at the start of 2000, when the dot-com bubble peaked.
Commerzbank economists Jörg Krämer and Bernd Weidensteiner argue that an AI-driven investment surge in US high-tech and IT is meaningful, but not yet excessive compared with past booms. They see early signs including faster US productivity, along with elevated equity valuations and rising profit expectations.
While the economists warn that the scale of deployed resources raises the risk of a bubble and could lead to a stock market correction, they conclude the AI boom and related market strength are likely to continue for now. They compare the situation to earlier investment cycles, including the dot-com boom.
The team also points to valuation context, saying stocks are expensive but valued lower than at the dot-com peak. They cite an S&P 500 price-to-earnings ratio of 20 based on expected earnings for the next twelve months, compared with 25 at the beginning of 2000.
On financing and downside risk, Commerzbank says much of the investment has so far been funded from cash flow, with companies only recently relying more on loans. It adds that overall corporate debt has been declining relative to GDP for years, so an end to the AI boom would be less likely to trigger a banking crisis, instead resembling a stock price slump similar to 2001.
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