Summary:
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AI Stock Surge: Jefferies’ basket of 27 large-cap AI stocks has soared 127% in value since the launch of ChatGPT in late 2022, adding approximately $10 trillion in market cap. Nvidia has experienced the largest gains, with its stock price increasing by 656%.
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Earnings Discrepancy: Despite the significant rise in stock values, 2025 earnings forecasts for these companies have only increased by 25%. This disparity has resulted in an incremental price-to-earnings ratio of 73 times, indicating that investors are anticipating extremely high growth across the sector.
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Future Prospects: Jefferies notes that the AI bubble could continue to expand in the near term due to strong capital expenditure plans through 2025 and substantial cash reserves at major cloud providers, despite current signs of overvaluation.
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