Bob Homan: Are AI shares too good to be true?

Bob Homan: Are AI shares too good to be true?

September 9, 2025

Artificial Intelligence Equity

This column was originally written in Dutch. This is an English translation.

By Bob Homan, Head of ING Investment Office

Artificial intelligence is everywhere. In the media, in business strategies, in your private life, and above all: in stock market prices. The hype is reaching a peak.

Companies that profile themselves as leaders in artificial intelligence (AI) are rewarded by investors with valuations reminiscent of previous technology hypes. This is understandable, because the story is very compelling. But as is often the case with compelling stories, there is a downside. What happens when growth levels off, while the valuation is based on yesterday's pace?

We are not there yet. Current valuations of AI-related shares are high, sometimes extremely high. But not without reason. Combine this unprecedented high revenue growth with enormous economies of scale and a technology that can be applied in virtually every sector, and you have the recipe for unbridled enthusiasm among investors. And the market looks ahead: if the future looks bright, such shares will easily command a high valuation.

Lower expectations throw a spanner in the works

Nevertheless, it is important to realise that no growth curve lasts forever and that trees do not grow to the sky. Technology companies often have a life cycle that takes them from pioneer to market leader and ultimately to established player. In addition, growth can be hampered by environmental factors, such as limited access to raw materials, components or electricity. At some point, growth slows down – and valuations will have to follow suit. But that rarely happens in time. As I have seen time and again, investors hold on to the old story for too long. Until a quarterly figure disappoints. Or a competitor emerges that innovates faster. Then sentiment shifts and a sharp correction follows.

Expensive lessons from the dotcom period

We have seen it happen before. During the dotcom period, with 3D printing and even with cannabis companies. The common thread: high expectations, tall tales that are initially fulfilled, but where sooner or later – bang! – expectations are adjusted downwards. Wouldn't it be fantastic if valuations gradually adjusted to the new narrative? Ideally, share prices would rise less rapidly than profits for a while.

Ultimately, this also applies to AI. It is a powerful technology, but here too, valuations will eventually have to adjust to lower growth expectations.

Dealing with declining hype

For investors, it is important not only to listen to the nice story, but also to look at the hard figures. Those who are now entering the market would do well to remain alert to signs of declining growth. At the moment, I do not see any problems with AI shares, but if valuations remain this high in a year or two, it will be time to take notice. The story of profits growing indefinitely in share prices is proving to be a fairy tale. And they lived happily ever after.

 

 

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