I heard something interesting. The 2020 – 2021 bubble was almost identical to the dot.com bubble. Fund managers were buying companies that were growing fast, were not profitable and had never been profitable, and had enormous valuations. Actually, in 1999, fund managers were buying companies with a p/e of 100. In 2020 – 2021, fund managers were buying companies with a p/s ratio of 100. So human nature never changes.
That was true of the dot.com bubble. I don’t think you can say that for AI. Nvidia, Microsoft, Alphabet, Meta all have earning. Nvidia expects to report earnings Aug 23 nearly triple the figure a year ago.
Yes, we expect dozens of AI penny stocks with plans to take over from the leaders. I wouldn’t count those.
How broad will the AI boom go. Will every tech company claim to have an AI division? Will they outsmart the leaders.
As usual speculators will have fun with it. Some will get it right. Others will get sheared.
Many of the dot.com stocks were worthless, but Cisco (one that wasn’t) had earnings in 2000 and was growing over 60% with no signs of any slowdown in sight (much like many 20/21 high flyers were 2 years ago), yet the CSCO stock price has yet to make a new high since that time… after 23 years.
Recall in the early days when everyone thought internet would be free–supported by advertising. IPO brought gobs of cash to explore. They could pay well and hire top talent from major employers. Those majors couldn’t pay competitive salaries–especially with high flying stock options included.
And remember when Aol bought Time Warner!!!
Do you think AI will take over the world?
I was talking about 2020 - 2021. AI is 2023. In 2020 - 2021, there were a lot of companies that if you went by gaap earnings were not profitable and were being bought by fund managers. Doordash is a good example of a company like that. Twilio is still not profitable.