Adjustment in AI Tech Stocks: Commercialization Speed and Market Size at Stake

Recent analyses suggest that the recent adjustment in tech stocks cannot be solely explained by the rise in U.S. long-term Treasury yields. It is evaluated that the long-term pricing of artificial intelligence (AI) related stocks is once again under scrutiny. In a report, Zhongxin Securities mentioned that the key variables in the adjustment of tech stocks include the speed of AI commercialization, market size, and whether the advantage in computing power translates into market share and pricing power, as well as whether the current computing gap can widen the long-term AI model gap. The common concern in the market revolves around the speed and scope of AI commercialization. Even if AI companies continue to make large-scale investments, if the speed at which they convert these into actual sales and profits falls short of market expectations, the valuation burden could increase. Zhongxin Securities pointed out that 'distillation prevention' is the biggest potential variable that could widen the model gap in the future. Distillation prevention refers to the technical responses that prevent latecomer models from catching up with the performance of leading models. As for macro variables, it is assessed that the impact of the U.S. Treasury's expansion of long-term bond buybacks is limited, and in the short term, a weaker dollar and diminished expectations of interest rate hikes are seen as favorable for alleviating the 'K-shaped divergence' in global markets. The report warns that the fundamental factors that have driven U.S. long-term yields higher have not changed, and market disruption factors may continue for the time being.