I follow David Bahnsen who writes the Dividend Cafe. Here’s an outstanding, well-thought-out article about the AI bubble.
Wendy
5 Likes
AI bubble to me is a popular buzz word talking heads are talking about. They often seem to be air heads. I do not follow their advice.
Some AI stocks are in a bubble. C3.ai recently put itself up for sale. Highly speculative stocks are a risk. Some will fail.
Many like Nvidia are well funded have modest PEs and are likely succeed. Sales may slow some day but they are well managed and likely to reinvent them selves. No one thinks they are headed for bankruptcy. Rate of gain may slow. I’d be surprised to see more than a 20% correction.
Other well capitalized companies are spending big building capacity. They may or may not succeed. Failure means assets will be sold to someone else. Not likely to be worthless (unless the technology used becomes obsolete). The downside risk is that earnings will not reach targets.
In the dot com bust people built fiber too fast. Much of it was “dark fiber” overbuilt and never used. Could that happen w AI? Maybe but probably not w companies able to pay cash to build it.
Do you research. Choose wisely.
6 Likes
I read ‘Keeping an AI Bubble from Hurting You’ but couldn’t find where he said how. Or where his firm is putting its clients money.
DB2
2 Likes
Bubble has become a buzz word without meaning, like hell, brimstone, and fire in other venues. It would be more useful if they talked about over-bought and over-sold stocks. That’s actionable.
I stopped reading after…
I decided to write about this topic several weeks ago, believing the story of AI, capital expenditures around AI, the role of such companies in the stock market, and where this all goes from here to be among the biggest stories investors have faced in a long, long time. There is a potential inconsistency in what I just said, as I spend a great deal of time [accurately] insisting that the primary determinant of investor success is not something to be found in the headlines. “Noise” in markets, as we often call it, does not drive investor returns. If what I were saying were that there is a lot of “noise” around this AI talk right now (for good or for bad) and how investors “play” the noise will be really important for their portfolio, then yes, I would be guilty of contradictory messaging. But I am actually saying something very different. And what I am saying about the potential of an AI bubble is the subject of today’s Dividend Cafe.
If there is a bubble why not tackle it directly?
The Captain
3 Likes
How would you tackle it directly?
Wendy
1 Like
Skip the quoted 171 word introduction with six uses of the word “I.” Get to the point which is bubbles.
The Captain
2 Likes
The market leadership is narrow and at nose bleed heights. Most people going long right now want to get rich at the top of the market. Youngsters.