Relentless stock market highs, astronomical valuations for OpenAI, and reports of hyperscalers taking on more debt have stoked fears that the AI boom is another tech bubble ready to pop.
Even OpenAI CEO Sam Altman acknowledged this summer that investors were getting “overexcited about AI” and drew parallels with the dotcom bubble.
But Capital Economics pointed out that year-ahead earnings forecasts for S&P 500 companies—forward-12-month (FTM) earnings per share (EPS)—are rising and underpin the stock market rally.
“Although this has mainly reflected developments in the ‘big-tech’ sectors, which have collectively continued to experience phenomenal earnings growth, FTM EPS have also picked up in the rest of the index,” Capital Economics chief markets economist John Higgins wrote in a note Monday.
Meanwhile, the ratio of stock prices to earnings estimates has barely increased, edging up to roughly 22.6 from about 22.3 at the start of this year, he added.
