AI | China International Capital Corporation: It still hasn't reached the typical bubble stage

China International Capital Corporation (CICC) released a research report stating that, based on discussions from three dimensions—demand, investment intensity, and market pricing—artificial intelligence (AI) is still not in a typical bubble phase. However, the objective existence of “racing ahead” in investment relative to demand and capability is present, which is also the main reason why AI has been progressing through ups and downs over the past few years.

CICC indicated that since the end of March, led by AI, the U.S. stock market, the ChiNext board in A-shares, and stock markets in Japan and South Korea have continued to strengthen. While factors such as the geopolitical situation not worsening further and improved market sentiment have boosted this trend, the impressive performance of technology stocks in the first quarter has also played a significant role. The recent market performance dominated by AI also leads profits and growth.

The report states that the AI market trend since 2023 has not been a one-sided upward movement. Generally, after a rapid rise over two quarters, concerns about bubbles increase, leading to volatility or weakening for one quarter while waiting for new catalysts.

Cloud vendors and chip sector valuations remain in relatively low ranges

CICC mentioned that this year’s AI market, which initially was dominated by cloud vendors and chip manufacturers experiencing a “broad rally,” has entered a stage of industry chain expansion and internal differentiation led by bottleneck segments such as storage and optical modules. Segments like storage and optical modules are leading the rally, while chips lag behind, and cloud vendors have even underperformed the S&P 500 index. This reflects that the AI market has not receded, but market pricing has shifted focus from simple capital expenditure expansion to a stage more sensitive to order certainty, profit realization, cash flow pressure, and investment returns.

The report pointed out that, compared to valuations already in high percentiles for semiconductor equipment, optical modules, power, and cooling, the valuations of cloud vendors and chip segments remain in relatively low percentiles, not yet reaching the high levels associated with bubble concerns in July 2024 and October 2025. From this perspective, the release of second-quarter earnings in mid-July may become a key point for verifying the next wave of market trends and switching directions, especially for segments with high valuations that require more certain profit realization to support their valuations.