CITIC: AI Demand Near 1998-1999, Market Pricing 1997-1998

China International Capital Corporation (CITIC) assessed the current stage of the artificial intelligence market using a historical framework comparing it to the internet boom cycle of the 1990s. According to CITIC’s analysis, the demand side is approaching 1998–1999 levels, investment intensity and capacity are near 2000 levels, and secondary market pricing resembles 1997–1998 conditions.

CITIC’s Bubble Assessment Framework

In a report published in late November 2023 titled “AI Bubble: How Far Along Are We?,” CITIC outlined its methodology for evaluating bubble risk. The framework rejects three common misconceptions: that sustained price increases indicate a bubble, that high valuations and market concentration are inherently problematic, or that concentrated leadership among dominant firms signals excessive speculation. Instead, CITIC identifies a true bubble as occurring when pricing becomes divorced from fundamental value.

According to CITIC, the critical distinction is not whether investment is accelerating—acceleration itself is normal—but whether investment volumes exceed actual demand and the market’s capacity to absorb them. The firm emphasizes that determining bubble stage requires examining multiple dimensions simultaneously: demand levels, investment capacity, and market pricing relative to fundamentals.

November 2023 Assessment

When CITIC released its bubble analysis in late November 2023, the firm concluded that the market had not yet entered a bubble state. Using the internet revolution cycle as a historical analogy, CITIC positioned the market at the 1996–1998 stage at that time. This assessment reflected CITIC’s view that despite ongoing concerns about “overinvestment” following each period of AI earnings surprises—particularly after ChatGPT’s emergence in 2023—the market remained within normal expansion parameters.

Current Market Positioning

Applying the same framework and methodology to the present period, CITIC has updated its market positioning across three dimensions:

• Demand side: Approaching 1998–1999 levels, indicating accelerating commercial adoption and use-case development
• Investment intensity and capacity: Comparable to 2000 levels, reflecting sustained capital deployment and infrastructure buildout
• Secondary market pricing: Resembling 1997–1998 conditions, suggesting valuations remain within historical precedent relative to the underlying growth cycle

CITIC’s multi-dimensional analysis suggests that while different market components are at different stages of the technology adoption cycle, the overall positioning does not indicate an imminent bubble collapse but rather continued evolution through the expansion phase.