Big Tech Keeps Spending Despite Rising AI Bubble Fears: ETFs in Focus

Core Viewpoint - Concerns about a potential bubble in artificial intelligence (AI) stocks are rising, with a significant number of global fund managers believing that valuations are excessively high [1][2]. Group 1: Market Sentiment and Valuation Concerns - Approximately 54% of fund managers surveyed indicated that tech valuations are too high, a notable increase from the previous month when nearly half dismissed such concerns [2]. - The Nasdaq 100 has increased by about 17.6% this year, leading to a forward price-to-earnings ratio of nearly 28, surpassing the decade average of 23, raising questions about the sustainability of earnings expectations [3]. - JPMorgan CEO Jamie Dimon expressed caution regarding elevated asset prices, labeling them as a "category of concern" [4]. Group 2: Diverging Opinions on Tech Bubble Risk - While some investors are cautious, Goldman Sachs strategists believe it is too early to fear a full-blown tech bubble, as equity allocations among fund managers have reached an eight-month high, indicating underlying optimism [5]. - Large professional investors have shown bullish sentiment entering the fourth quarter, having added to riskier assets for five consecutive months, according to State Street's Risk Appetite Index [6]. Group 3: Big Tech Investments in AI - Major tech companies are heavily investing in AI, with Google announcing a $15 billion investment in India for a new data center hub, and AMD's shares rising due to a new chip partnership with Oracle [7]. - OpenAI has secured significant chip and infrastructure deals with companies like Broadcom, AMD, Oracle, and NVIDIA, and has partnered with Walmart to enhance AI-powered retail tools [8]. Group 4: Investment Opportunities in ETFs - Semiconductor stocks are benefiting significantly from the AI boom, with the iShares Semiconductor ETF (SOXX) up 28.7% this year, driven by increased demand for efficient chips [9][10]. - The Utilities Select Sector SPDR ETF (XLU) has gained about 20% this year, as AI's energy demands boost growth prospects for utility companies [11][12]. - The iShares US Technology ETF (IYW) has increased by approximately 22.1% this year, reflecting the strong financial positions of big tech companies [13].