Global fund managers 53% "Already in a bubble"

Korea Economic Daily

Summary

53% of global fund managers said AI-related stocks are already in a bubble.
Managers who participated in the survey said the proportion of cash holdings averaged 3.7%, leaving concerns about the possibility of a sharp market correction.
They reported many respondents expected relative weakness in U.S. stocks next year and outperformance from foreign stocks and the yen.

Bank of America survey

Average cash holdings only 3.7%

Possible market correction within 3 months

More than half of global fund managers appear to perceive that 'artificial intelligence (AI)-related stocks have entered a bubble.'

Bank of America (BoA) surveyed 172 fund managers overseeing assets of USD 475 billion (about 696 trillion won) between the 7th and the 13th, and found that respondents who evaluated 'AI stocks are already in a bubble' accounted for 53% of the total.

Managers were concerned that the scale of AI-related investment by tech companies is growing to a level that is hard to guarantee sustainability. According to Bloomberg, listed companies in the United States issued more than USD 200 billion in bonds for AI-related investments this year alone. Investment bank Barclays estimated that such AI-related investment could rise to 10% of US total gross domestic product (GDP) by 2029. Anton Dobrovsky, a T. Rowe Price manager, also said, "The rapid growth of AI-related bond issuance in the public and private bond markets is worrisome."

Managers who responded to the survey worried about an AI bubble but did not increase cash holdings. The proportion of cash holdings within portfolios averaged just 3.7%. This is a factor that heightens concern from the view that potential sell pressure could be that much greater in the event of a sudden market correction. BoA explained, "Historically, when fund managers' cash proportions have fallen to figures like this, a market correction and a rise in government bond prices have followed within three months."

In response to a question about next year's financial market outlook, many answered that 'U.S. stocks will be relatively weak.' 42% of respondents expected 'foreign stocks will perform best next year,' while the response that U.S. stocks would yield the highest returns among major markets was only 22%.

They singled out the Japanese yen as a promising currency. They expressed the perception that the yen is currently significantly undervalued despite the election of Prime Minister Sanae Takaichi, who is pursuing expansionary fiscal policies.

Beomjin Jeon / Myeonghyun Han reporters forward@hankyung.com