Is the hype around AI stocks sustainable? Warnings from Chinese firms and investment analysts loom

Is the AI stock hype sustainable? Warnings from Chinese firms and investment analysts loom

TL;DR Breakdown

  • China’s ChatGPT share price has recently skyrocketed, but tech firms have warned investors that there is still a long way off from achieving profitability in this sector.
  • Many tech firms have lowered their expectations pertaining to ChatGPT.

Beijing Deep Glint Technology Co. plunged 10.2% on Monday, after declaring it could not offer ChatGPT-linked products—a sign of what may come in the future for many businesses. Nevertheless, some companies like Cambricon Technologies Corp and TRS Information technology Corp surged 5%, extending their recent gains in the market.

As investors rush to take advantage of AI-related stocks being touted as a breakthrough for tech, an air of caution has been created. Market analysts are warning that solid fundamentals don’t support these gains, intensifying comparisons between this rally and the blockchain boom, which quickly faded after its brief exponential increase.

“we can’t ignore the fact that apart from those companies with outstanding technological capabilities, many are simply taking a ride on this wave of hype. Unsustainable rallies like these typically lack any clear financial gains.”

Vey-Sern Ling, managing director at Union Bancaire Privee.

The uncertainty over ChatGPT

Although Beijing Deep Glint has tempered its expectations for ChatGPT, 360 Security Technology Inc. followed suit and highlighted the uncertainty surrounding the service’s launch date and output on Friday— three days after their stock saw its highest one-day jump since November 2020. CloudWalk also cleared up any speculation regarding revenue generated by ChatGPT products or collaborations with OpenAI; they have neither participated in nor made money from these endeavors.

According to Christina Woon, an Asian equities Investment Director at abrdn plc, the recent rally appears to be highly speculative. As such, it is essential for companies to explore how they can use this surge of activity to strengthen customer loyalty and engagement with their services or products. Additionally, these businesses must also consider ways in which they can capitalize on this newfound momentum – whether directly or indirectly

Regulators’ warnings fail to dampen the hype surrounding ChatGPT stocks

The Chinese onshore stock market investors, particularly retail players, have become well-known for riding the most current craze even before companies offer products to their market. Beyond the blockchain mania, traders also acquired shares of meat substitutes three years ago despite it having a marginal position in China’s marketplace.

Despite pleas from local regulators to halt their enthusiasm, ChatGPT stocks remain a hot commodity. In fact, three companies were asked by stock exchanges why their shares had risen over 30% in just three days last week. Even with warnings on the front page of a Chinese newspaper advising against entering this speculative rally without careful consideration, investors continue to be lured into purchasing these stocks.

On Monday, Meituan’s co-founder Wang Huiwen invited AI talents— through Jike (a social networking platform)—to build the Chinese version of OpenAI.  After leaving the Chinese food delivery company in 2020, the entrepreneur announced that he had invested a massive $50 million into his new project with an estimated valuation of 200 million. As if this wasn’t enough, Wang also secured another round of fundraising at $230 million.

Jefferies Financial Group Inc. has revealed that Chinese players will likely pursue ChatGPT-related technology. Still, potential struggles might not have been taken into account yet—information accuracy is a significant challenge, pricing models remain undetermined, and the cost of learning could be high.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

Damilola Lawrence

Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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