DBS CIO Says AI Stocks Not in Bubble Despite Strong Valuations

DBS Group Chief Investment Officer Hou Wey Fook argues that artificial intelligence-driven technology stocks are not in bubble territory, citing Nvidia's valuation as evidence. The chipmaker, a poster child for AI, trades at 17 times its 12-month forward earnings with projected earnings growth of 70% next year. Hou contrasted this with Cisco Systems Inc., which traded at about 100 times earnings before the dot-com crash, emphasizing the relative affordability of current AI stocks.

"If I describe the poster child of AI trading at mid-teens, how can it be a bubble?" Hou said in a Bloomberg TV interview. He highlighted ongoing "tailwinds" supporting the semiconductor and AI sectors, suggesting continued growth potential. Despite his optimism, Hou recommends a "barbell" investment strategy to manage portfolio volatility, balancing technology stocks with investment-grade fixed income for stability.

Hou also identified hedge funds and gold as risk diversifiers in the middle of the portfolio, offering additional protection against market fluctuations. His approach underscores a cautious yet optimistic outlook on AI-driven stocks, advocating for a diversified strategy to navigate potential volatility.