JPMorgan predicts AI correction and slower U.S. market expansion
JPMorgan has issued a warning about a potential correction in artificial intelligence valuations, noting that the growth potential of the U.S. stock market is currently limited.
The five largest tech companies are expected to invest around $371 billion this year in data centers needed to train and operate advanced AI models. According to McKinsey & Co., maintaining this infrastructure could require $5.2 trillion by the end of the decade to meet demand.
However, Daniel Pinto, Vice Chair of JPMorgan Chase & Co., cautions that the rapidly expanding AI sector may be facing challenges.In his view, current valuations imply a surge in productivity that could happen, but is unlikely to materialize as quickly as the market expects.
“To justify these valuations, you’re looking at a level of productivity that… will be achieved, but maybe not as quickly as the market is currently pricing in,” Pinto said.
A need for objective assessment
Pinto’s comments align with previous warnings from other Wall Street leaders about a potential bubble in AI valuations fueled by massive investment in the sector. Still, he emphasized the need to establish a realistic productivity level—one that will eventually be reached, even if not at the pace markets anticipate—to support current valuations.
He also warned that a correction in AI-related valuations is likely. Such a correction, he noted, would impact the broader segment, the S&P index, and the industry as a whole.
Pinto expressed confidence that the U.S. may avoid a recession, but added that the growth potential of the country’s stock market is currently limited.
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