Letters | As AI stocks soar, investors ought to curb their enthusiasm
- Readers discuss the current boom in AI stocks, and a large-scale cryptocurrency fraud
While these terms are sometimes used interchangeably, they represent fundamentally different economic phenomena. A boom signals a period of pronounced growth and burgeoning interest in an industry, driven by genuine advancements and market demand. The industrial and the mobile revolutions exemplify the transformative boom.
Bubbles, in contrast, are characterised by asset prices that become divorced from their underlying value, driven by unrealistic expectations and irrational exuberance. This unsustainable growth inevitably culminates in a painful correction, when overvalued assets experience sharp declines, causing widespread economic repercussions. The Japanese asset price bubble in the 1980s and the US housing market collapse in the 2000s serve as stark examples.
The AI industry currently finds itself in the midst of a boom, fuelled by rapid advancements in machine learning, neural networks and computing power. These groundbreaking innovations have the potential to revolutionise industries and create new markets.
However, the AI boom is not immune to the risk of bubble dynamics. The dotcom bubble of the late 1990s, for example, was fuelled in part by a media frenzy that hyped the potential of internet companies, leading to a surge in speculative investment. Similarly, the current AI boom has been accompanied by extensive media coverage and public fascination with the potential of AI, which could contribute to inflated expectations and valuations.
In addition to public sentiment, investments could be risky if they are made without sufficient due diligence or regard for long-term viability. An accommodative monetary policy and lax lending standards fuelled the Japanese asset price bubble, while loose lending standards and the proliferation of subprime mortgages contributed to the US housing market bubble.
As AI stocks soar, investors must prioritise sustainable growth. History tends to repeat itself. In the 1890s, there was the British bicycle mania. The numerous publicly traded bicycle companies that folded when that bubble burst are a reminder of the perils of unchecked hype. To avoid a similar fate, the AI industry and investing public must ground their enthusiasm in realistic assessments.
Rob Yau, Kennedy Town
Massive bitcoin fraud a wake-up call on regulation
Wen was said to be acting on behalf of a woman called Qian Zhimin, allegedly the mastermind of fraudulent wealth schemes that ensnared nearly 130,000 Chinese investors between 2014 and 2017. Cash from these investors was converted into bitcoin.
This case has not only exposed the risks of bitcoin being used in criminal activities, but also reflects the inadequacies of current laws in dealing with virtual currency-related crimes.
The anonymity of virtual currency transactions helps criminal elements launder money and evade law enforcement. The current laws are clearly unable to keep up. Cryptocurrency exchanges can become money laundering tools without effective oversight.
Dedicated laws requiring virtual currency trading platforms and related businesses to implement stringent anti-money-laundering and counterterrorist financing procedures, including customer due diligence and suspicious transaction reporting, are needed. Clarifying the legal status of virtual currency transactions is also crucial.
International cooperation and information sharing is important. The global nature of virtual currencies requires enhanced cooperation between different jurisdictions, including joint law enforcement efforts and intelligence sharing, to intercept cross-border money laundering activities.
Finally, educating the public and raising awareness is crucial. The general public, especially the younger generation, lacks understanding of virtual currencies, making them susceptible to scams.
The Qian Zhimin case has set alarm bells ringing. Without effective regulation, virtual currencies can easily become tools for criminals to engage in illegal activities.
David Chan, Yau Ma Tei
