AI bubble to burst soon? Artificial Intelligence meltdown in China but Anthropic IPO at US Stock Market tell interesting stories of AI boom

AI boom has become a point of concern for investors around the world. While global tech stocks teeter, in China they have already crashed as lofty valuations collapse under worries about AI demand and curbs on Chinese exports. However, some of the leading artificial intelligence companies are moving toward initial public offerings at eye-popping valuations in the US Stock Market. Anthropic and OpenAI are looking to go public to access more capital in the race to shape the technology's future.

AI Boom

The enormous sums involved in building and maintaining artificial intelligence models, the pursuit of artificial general intelligence, which can surpass humans at many tasks, and widespread AI adoption all have led to an air of excitement around the technology that has helped propel stock market gains.

“These companies are now burning through cash to win the AI race, and public equity is the cheapest source available, particularly in a rising interest rate environment,” said Michael Field, chief equity analyst at Morningstar.

But amid the billions — even trillions — at stake, worries about an AI bubble are looming in the background along with concerns about keeping the technology under human control. Some experts fear tech companies and venture capitalists are pouring too much money into a still-nascent technology.

AI Stocks Crash in China

The meltdown in China, tanking the mainland STAR50 index of AI and semiconductor leaders by 40 per cent in less than four months and vaporising some $480 billion in market value, is an ill omen for wobbly world markets and a dampener on China's efforts at encouraging its savers into stocks to fund the AI boom.

It has also slammed the brakes on a rally running two years, since economic stimulus promises sent shares soaring, and has stalled Beijing's push to break with a long boom-bust pattern and drive a "slow bull" market that delivers reliable performance. China's broad blue-chip index has dropped about 20 per cent from highs made in June.

"The stock market later evolved into a speculative crazy bull," said Beijing-based fund manager Dong Baozhen. "And now we see the bubble bursting."

The reversal reflects a rally that ran to higher heights than markets in the West or elsewhere in Asia, and compares with a mere prick to US AI stocks, which have led a 6 per cent drawdown in the Nasdaq from a record high scaled three weeks ago.

There has been no obvious selling trigger in China, although traders said high prices, tax bills and the threat of the US or other nations banning Chinese equipment in data centres all contributed.

With AI stocks running to 42 per cent of China's market capitalisation and 57 per cent of turnover across mainland-listed A-shares and Hong Kong's H-shares, according to Goldman Sachs, few in a market dominated by small investors have escaped pain.

US Stock Market

However, in the US Stock Market, there are some of the biggest AI-focused companies that are eager to make debut.

Anthropic: Anthropic, which filed paperwork Monday for an initial stock offering on Wall Street, was formed in 2021 by former OpenAI leaders. The maker of the Claude chatbot was recently valued at $965 billion, making it one of the world’s most valuable startups. It has been a meteoric rise for what was once a little-known research laboratory in San Francisco. Its value is reportedly expected to rise to $1.5 trillion or possibly $2 trillion. In its regulatory filing, Anthropic said it will list its stock on the Nasdaq Global Select Market under the ticker symbol “ANT.”

OpenAI: The maker of ChatGPT began in 2015 as a nonprofit dedicated to developing AI for the common good. It is now a company valued at $852 billion planning an IPO next year. While OpenAI may have helped set off the current AI boom, Anthropic’s meteoric rise and Claude’s growing popularity have left the ChatGPT maker playing catch-up.