I was in the comments to a post about something completely different and inadvertently started a debate on this topic (LOL), so wanted to start its own discussion thread because this is an important topic with lots of viewpoints. I anticipate/hope we will get the statistics folks to reformulate the current market ratios and create new ones and tell us which ones are important and which ones aren’t and we’ll have at least 3 people who redefine the term ‘Bubble’ so that the answers will be a lot more nuanced then yes or no. We should welcome all of that and get everyone’s views because in the end, NONE of us will be completely correct!
My take, we have too many young traders who treat the stock market like a casino. For that reason, uneducated sentiment has the capacity to drive dips and swells and volatility which we might call a ‘Bubble’ when too many gamblers are riding a group of stocks or indexes simply because they think they can time the market and market sentiment. But AI will escape the Bubble fate in the bear term because while it may be more expensive then past market leaders, it is not illogically priced and the opportunity to own a piece of the current technology is like the opportunity to own copper before electricity or oil before automobiles. And a key difference is that it is mostly intangible “Intellectual Property” that is owned and unlike a physical commodity, it can be leveraged an infinite amount of ways, so the earnings capacity of a single piece of AI code has almost limitless earnings capacity. The only limitation is the ability of the owner to build sufficient infrastructure to put it to work.
Think about a new drug that cures every kind of cancer. Now imagine that we ALL have cancer. The stock of pharmaceutical companies can go up thousands of percent overnight if you are there on the day that the breakthrough is discovered. That’s how you have to think about AI, but it’s nit just curing cancer (and it WILL do that), it’s curing every illness and disease known and unknown, it is automating everything, it will simplify attainment and use of logic and knowledge in all aspects of our lives. As the hardware becomes better and more efficient and everything is using it and it is all tied together, it will be even more efficient and effective.
So, you’re paying 40x earnings? In the next 5-10 years earnings will be 1000x what they are today for a company like NVIDIA. Ownership is almost priceless, there’s no “Bubble”, they’ve discovered the cure for cancer and everything else; if it were a pharmaceutical company, the stock would have been up 10,000x by now.