BNP Paribas: China’s AI scarcity creates premium investment valuations

China’s AI market scarcity is driving premium valuations in equity investments, according to BNP Paribas Asset Management analysis. The limited availability of AI investment opportunities in the Chinese market is creating heightened competition and inflated prices for available assets, reflecting broader market dynamics where demand significantly outpaces supply.

What you should know: BNP Paribas Asset Management’s Chen Zhikai highlighted how China’s constrained AI market is creating a scarcity premium effect on equity valuations.

• The limited number of AI investment opportunities in China is driving up prices as investors compete for access to available assets.
• This scarcity dynamic reflects broader challenges in China’s AI investment landscape, where regulatory and market constraints limit the pool of investable companies.

Regional comparison: South Korea’s AI capital expenditure presents a different investment picture with both opportunities and risks.

• Chen Zhikai noted that South Korea offers greater visibility in AI capital expenditure cycles, providing more transparency for investors.
• However, he warned that South Korean AI-related share prices have experienced significant appreciation, pushing valuations to near-record highs.
• The high valuations suggest that much of the expected AI growth may already be priced into South Korean equities.

Why this matters: These regional differences in AI market dynamics highlight the complex investment landscape across Asian markets, where scarcity premiums and valuation concerns are shaping investor strategies and capital allocation decisions in the rapidly evolving AI sector.