Citadel founder Ken Griffin said Tuesday night that AI stocks are almost certainly in a bubble, but that is no reason to sell. He pointed to a slump in semiconductor shares and to concerns about GPU overcapacity as signs that investors are starting to do their research.
Ken Griffin said there is almost certainly a bubble within the AI trade, yet he argued it is no reason to sell. He spoke at an annual conference run by Citadel Securities, the market maker he mostly owns. Griffin is also the majority owner of the hedge-fund giant Citadel LLC.
Griffin drew on the dot-com boom, when many internet companies were valued unrealistically. He said he wishes he had kept his Amazon stock from that period, and he added that any radical transformation of the economy is generally intertwined with a bubble. The companies on the other side of such bubbles, he said, are the market leaders for decades to come.
Chip stocks slide as investors grow selective
Griffin addressed the recent slump in semiconductor stocks. The VanEck Semiconductor ETF has dropped in 10 of the past 11 trading sessions, and the Nasdaq Composite has closed with losses in seven of the last 10 sessions.
He described the shift as a change from the past couple of years, when there was a sense of buying the entire AI supply chain. According to Griffin: "we’re reaching a point where people are becoming more discerning" (MarketWatch).
GPU overcapacity is one major issue Griffin flags
Griffin named potential overcapacity of graphics processing units as one major issue for the industry. He compared it with the telecom build-out in 2000, when more fiber was built than demand required and telecommunications prices went straight down.
Investors are also asking what the useful life of a GPU looks like, according to Griffin. Some buyers are earning extraordinary pricing on GPUs that are five or six years old, he said, and that probably does not persist for another five or six years.
Griffin added that U.S. companies need to decide which parts of their businesses require high-priced models from OpenAI and Anthropic and where cheaper open-source models will do. He said some areas hold a lot of waste, and companies will have to pivot around it.
U.S. stocks were higher Wednesday after upbeat results from SpaceX and Super Micro Computer.
Source: MarketWatch
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