The U.S. capital markets have always been the first to reflect humanity's optimism. This was true during the 19th-century railroad era, the 20th-century automotive and electrical industries, and the internet and smartphone revolutions. Each time new technology emerged, people bought into the future before calculating the present. In this process, humanity has created immense wealth but has also faced the harsh consequences of bubbles and crashes.
Today, the U.S. stock market stands at another historical crossroads. The Economist recently warned that the market has entered a phase of 'euphoria' and 'mania' beyond mere optimism. A prime example cited is SpaceX.
SpaceX is a groundbreaking company that has transformed the space industry. It has revolutionized launch costs through reusable rockets, opened the satellite internet era with Starlink, and presented a vision for human colonization of Mars. However, no matter how great a company is, the capital markets ultimately evaluate it based on numbers.
The issue lies in those numbers.
SpaceX has been valued at more than 90 times its annual revenue. Within just a few days of its public listing, its market capitalization soared to $2.5 trillion, equivalent to Germany's GDP and surpassing the size of the French economy. Even more astonishing is that the company is not yet generating significant net profits.
Investors are currently betting on future potential rather than present performance. Investment banks predict that SpaceX's AI-related business revenue will grow 100-fold by 2030. In other words, the current valuation reflects expectations for the future rather than today's results.
Historically, great companies have always grown amid skepticism. Amazon and Tesla are prime examples. However, there is a difference between the market evaluating the future and blindly believing in it.
During the dot-com bubble of 2000, investors believed that 'the internet will change the world.' That belief was not incorrect; the internet did indeed change the world. The problem was the inability to distinguish between the companies that would emerge as winners and those that would not. As a result, while the technological revolution was accurate, the investment returns were dismal.
Today, AI is facing a similar situation. The expectation that AI will change the world is virtually undisputed. The question is how excessively current stock prices reflect that future.
The Economist expresses particular concern about the options market, which often shows investor sentiment more sensitively than the stock market. Options are inherently insurance products; investors buy put options to hedge against downside risk. However, there has been a surge in speculative short-term options trading in the U.S. market.
Notably, the trading of zero-day-to-expiration (0DTE) options has exploded. This resembles gambling more than investing. Even more surprising is that the price difference between call options and put options in the tech-heavy Nasdaq market has nearly vanished. Typically, put options should be more expensive due to high demand for insurance against declines. However, speculative demand betting on price increases is currently dominating the market.
This is not mere optimism.
It reflects a collective conviction that the market must rise, rather than a belief that it will rise.
Looking back in history, bubbles have always ended in the same way. The Dutch tulip bubble of 1637, the South Sea Bubble in Britain in 1720, the stock market before the Great Depression in 1929, and the dot-com bubble in 2000 all followed this pattern.
Every bubble burst not due to technological or industrial innovation, but because of human greed.
The legendary investor Sir John Templeton once said, 'Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.'
Where does the current U.S. market stand? Many experts believe it has already moved from 'optimism' to 'euphoria.'
Another investment sage, Warren Buffett, put it more simply: 'Be fearful when others are greedy. Be greedy when others are fearful.'
Currently, the U.S. market appears to be dominated by greed rather than fear. However, this does not mean a crash is imminent. Bubbles often last longer than expected. In fact, most investors make the most money just before a bubble bursts and lose the most immediately after.
Therefore, the key is not to predict the timing of a crash but to manage risk. Just because the market is in a frenzy does not mean it will collapse immediately. In fact, such frenzies can persist for an extended period. However, historically, the end of a frenzy has always been similar: when overly optimistic future projections completely overshadow current numbers, reality eventually presents the bill.
Korean investors are no longer mere spectators in the U.S. market. With the rise of 'Seohak Ants,' U.S. stocks and ETFs have become a significant part of Korean household assets. Investment in companies like Nvidia, Tesla, Palantir, Microsoft, and Amazon has reached unprecedented levels.
The problem is that shocks in the U.S. market can now directly impact Korea. If the U.S. stock market undergoes a significant correction, the value of domestic investors' overseas stock assets could plummet, leading to a chain reaction of rising won-dollar exchange rates, foreign capital outflows, and corrections in the domestic market.
Particularly, many individual investors in Korea have concentrated their investments in U.S. tech stocks and Nasdaq ETFs. While this can yield substantial profits during upswings, it also means that risks are concentrated during downturns.
However, Korean investors need not be overly pessimistic. Crises always accompany opportunities. As the U.S. market overheats, maintaining a level-headed approach becomes valuable. Managing cash positions, diversifying investments, and accumulating quality assets with a long-term perspective remain effective principles.
The AI revolution is indeed underway. The question is not whether the AI revolution is wrong, but how much of it has already been reflected in current stock prices.
The market always reflects the future first. However, a market that has overly anticipated the future must eventually reconcile with reality.
John Templeton's warnings and Warren Buffett's advice remain relevant today. The more greed dominates the market, the more investors must maintain their composure. The party may continue, but historically, every party eventually comes with a bill.
Now is the time to assess risks rather than boast about returns. Great investors have always been those who remain calm before the crowd gets excited and maintain their composure before the crowd panics.
※ This article was generated using AI and has been reviewed by an editor.
* This article has been translated by AI.
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