Fidelity International stated that despite market concerns about a potential bubble, ambitious spending plans by AI developers and rapid user adoption indicate the global AI sector's upward trend will persist.

Portfolio manager Joseph Zhang at Fidelity International noted that the recent decline in the global semiconductor sector is likely temporary, especially ahead of Nvidia Corp.'s highly anticipated earnings report later this week. He emphasized that unless capital expenditure or application growth in AI slows, the sector is expected to rebound after this pullback.

"We are still in the early stages of this trend," Zhang said in an interview, overseeing over $10 billion in assets at Fidelity. "It’s too early to exit now."

This view reflects the unwavering optimism of some investors, even as concerns about overvaluation have triggered sell-offs in leading AI stocks. Bullish investors argue that the AI boom represents a once-in-a-generation technological revolution, not merely a fleeting market trend. High-profile investments, such as Jeff Bezos’ new AI initiative, further bolster the sector.

**AI’s Growth Potential** Hartwig Kos, head of multi-asset growth at Allianz Global Investors, shares a similar outlook. He noted that few fully grasp AI’s potential, and investors have yet to fully understand its capabilities, making it "premature to declare an AI bubble."

For those unconcerned about an AI bubble, key slowdown signals—such as reduced capital expenditure, declining utilization, or breakthroughs that lower demand for data centers and chips—have yet to materialize.

Zhang pointed out that earnings for AI-related firms and memory chip prices continue to rise. While criticism grows over "circular investments" among AI companies, such views overlook the fact that "the AI revolution requires collaboration to build a new ecosystem."

"Medium-term, we remain quite optimistic about the broader tech sector and the AI cycle," he said.

However, further stock declines could test this confidence. After six months of gains, U.S.-listed semiconductor firms faced profit-taking in November. The U.S. chip index has fallen 9.4% this month, on track for its worst performance since March, while the Bloomberg Asia Semiconductor Index has dropped over 7%.

"Overall, market enthusiasm for AI may be overheated," said Mark Boulton, chief portfolio manager at Pictet Asset Management. "When the hype fades, disappointment could follow, forcing a market recalibration."

Another Pictet manager acknowledged reduced bullishness on Asian semiconductor stocks. "We were significantly overweight the sector," said Young Jae Lee, senior investment manager at Pictet. "Back then, I believed leading AI semiconductor stocks had over 50% upside. But our team’s confidence in AI today doesn’t compare—those gains are no longer as clear."

**Seeking Risk Protection** Echoes of the dot-com bubble are emerging, yet staying bullish on AI means overlooking warning signs. The "Magnificent Seven"—including Nvidia, Microsoft Corp., and Apple Inc.—have driven most of the S&P 500’s gains. As of early this month, Nvidia’s market cap alone surpassed the combined value of Italy, Spain, the UAE, and the Netherlands’ stock markets.

In Asia, investing in AI requires stronger conviction to offset regional headwinds, from trade tensions to China’s economic slowdown.

Zhang attributed recent selling partly to hedging ahead of Nvidia’s earnings. Investors may be buying put options for protection, pressuring the market.

"If Nvidia’s earnings meet expectations, investors will unwind hedges, likely triggering a rebound," he predicted.

Nvidia currently trades at 29 times forward earnings, which Zhang called "reasonable" given its growth momentum. Key Asian suppliers like Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. trade at even lower valuations.

"As long as fundamentals hold, liquidity-driven pullbacks often present buying opportunities," he said.