The Fundamental Justification of the Bubble-Like Gen AI Stock Valuations

Authors

Karlo Tokic, The University of Texas Rio Grande Valley
Luka Tokic, The University of Texas Rio Grande Valley

Document Type

Editorial

Publication Date

3-4-2025

Abstract

We discuss the valuations of Gen AI stocks within the framework of the investment opportunities approach to valuations of growth shares. The bubble-like valuations can be justified only if the Gen AI capex produces the rate of return in excess of a normal rate of return. At this point, the expected ROI on Gen AI Capex does not support the valuations.

In this article, we comment on the valuations of Gen AI–related stocks and discuss the key issues within the framework of the investment opportunities approach to the valuation of growth shares. First, we start with some background.

Comments

Student publication.

© 2025 Wiley Periodicals LLC.

https://onlinelibrary.wiley.com/share/RGTKC7SSDI7IPBMX5RBH?target=10.1002/jcaf.22792

Publication Title

Journal of Corporate Accounting & Finance

DOI

10.1002/jcaf.22792

Recommended Citation

Tokic, Karlo and Tokic, Luka, "The Fundamental Justification of the Bubble-Like Gen AI Stock Valuations" (2025). Finance Faculty Publications and Presentations. 42.
https://scholarworks.utrgv.edu/fin_fac/42