Tech stock fund manager Ruttenstorfer: “AI is more than just a hype”

Investors worldwide are concerning themselves with the question of whether current developments in artificial intelligence (AI) are creating a bubble on the equity markets, or whether they are actually heralding a new era of value creation. Billions are flowing into infrastructure, chips, and data centres – but what is really behind the boom? Bernhard Ruttenstorfer, fund manager of ERSTE STOCK TECHNO, assesses the situation.

Some tech companies currently command high valuations on the equity markets, and many players are talking about an “AI bubble”. How do you assess the current market dynamics, not at least taking into account the example of Nvidia’s recently presented results?

I think the discussion about an AI bubble is too simplistic. What we are currently experiencing is not a short-term hype, but the establishment of a new industrial base. The investments in data centres, chips, and electricity infrastructure are enormous and geared towards the long term. Global computing capacity is expected to multiply by 2035 – companies that are not among the traditional hyperscalers such as Amazon or Google will create capacities in the next ten years that are twice as large as those of all hyperscalers in 2024. These account for about 50% of the computing demand generated by AI. Companies outside the area of hyperscalers will invest around USD 2 trillion in expansion. The order books of the major providers are already thoroughly filled for the next few years. This illustrates that the situation is not based on hope, but on real demand and sustainable growth.

What distinguishes current AI investments from previous technology cycles?

The key difference is the infrastructure. Companies are investing heavily in hardware and networks to create the conditions for AI applications. Whoever provides the infrastructure has the most leverage in the value chain. The demand for computing power and chips is so significant that it exceeds supply, as can be seen in the high utilisation rates of data centres.

What role do large technology groups play in the AI boom?

The driving force behind this is clearly the established technology companies. They have the necessary resources, cash flows, and distribution networks to not only develop AI, but also to monetise it. Whereas many start-ups are still searching for viable business models, the tech giants are already successfully using AI in cloud services, advertising, and enterprise software. It is particularly noteworthy that, for the first time in years, we can see measurable productivity gains in large companies – clear evidence of the economic benefits of AI.

What risks can you see despite the investment boom?

Of course, there are risks. Individual shares can overheat in the short term, and there is a certain amount of investment pressure. Power shortages and geopolitical tensions in supply chains should not be underestimated either. Still, these risks are primarily of a cyclical nature and do not pose a structural threat to the system. The basis for the boom is real: electricity, silicon, fibre optics, and capital.

If we experience a technical correction after a sharp rise in prices over many weeks and months and some investors take profits, this does not come as a surprise. A real bubble only arises when there is no economic basis – this is not the case here. The investment wave will adjust and correct itself, but it will not disappear.

What should investors bear in mind when investing in the AI sector?

Investors should distinguish between short-term trends and sustainable business models. It is worth investing in companies that not only benefit from the AI hype but also create real value – especially in the areas of infrastructure and hardware. Demand currently exceeds supply, and in my opinion, the valuations of the big AI companies are justified. However, it is advisable to diversify the portfolio broadly and to keep a close eye on the market developments in order to minimise risks and make the most of opportunities.

 

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