By Iain Withers and Tommy Reggiori Wilkes
LONDON (Reuters) -The explosion in the value of artificial intelligence stocks poses risks to global markets for which there is "no playbook", the CEO of Deutsche
Bank's 1.1 trillion euro ($1.3 trillion) money manager DWS told Reuters, amid growing concerns that the sector is in a bubble.
The AI stocks frenzy has drawn comparisons with the 1990s dotcom boom and bust, but DWS's Stefan Hoops said today's rally was different as it was being driven by everyday retail investors – not institutions – and they had yet to be tested.
The Frankfurt-based asset manager is examining whether such a boom could unravel at a faster pace, Hoops said in an interview, adding that the many retail investors sitting on big gains on stocks such as Nvidia could be quick to sell if sentiment soured.
While institutional investors studied traditional metrics to assess if stocks are overvalued, retail investors often do not and many 'buy the dip' when there are declines, Hoops said. How they would behave during a sustained drop was unknown, he added.
"There's no playbook, there's no real history for something like that," Hoops said at DWS's London office.
"What's happening is this most amazing wealth creation (for retail investors)... Nvidia stock is now worth $5 trillion. My question is simply, could it go to $100 trillion? Or would at some point you be the first one to say, 'You know what, this is getting shaky?'"
The German giant believes AI will transform industries and Hoops did not predict a tumble, but said more evidence was needed beyond efficiency gains to sustain lofty valuations.
($1 = 0.8575 euros)
(Reporting by Iain Withers and Tommy Reggiori Wilkes, Additional reporting by Naomi RovnickEditing by Gareth Jones)
