AI Stocks Balloon Even As Earnings Lag, Jefferies Warns

An anonymous reader shares a report: A basket of 27 large-cap AI stocks created by wealth manager and brokerage house Jefferies has surged 127% in value since ChatGPT's launch in late 2022, adding about $10 trillion in market cap. However, 2025 earnings forecasts for these companies have increased only 25% over the same period, Jefferies warned in a note to clients.

This disconnect has pushed the incremental price-to-earnings ratio for AI stocks to 73 times, suggesting investors are pricing in extremely optimistic growth expectations across the sector.

Nvidia has seen the largest gains, with its stock price up 656% since late 2022. Despite signs of overvaluation, Jefferies believes the AI bubble could keep expanding in the near term, citing strong capital expenditure plans through 2025 and ample cash reserves at major cloud providers.

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