A number of investors told the Financial Times they were protecting their portfolios either by reducing their positions or by using derivatives that profit from falls in share prices.
How soon they forget… Look, we’ve seen this movie before. Companies introduce new, revolutionary products, valuations increase, every other firm in the sector tries to jump on the bandwagon, valuations soar, momentum drags everyone along, then boom. It’s over. A few companies with real products survive and prosper but with more realistic valuations and the rest disappear and become the latest Pets.com. 2001, 2008, 2021, this literally happens every few years. The only surprising thing is how people claim to be surprised when it happens again.
drummer820 on
From a T. Rowe Price analyst who sees nothing wrong quoted in the article:
“Unlike the dotcom bubble, today’s AI leaders are highly profitable, and much of the valuation expansion reflects rising return on equity”
Except for CoreWeave and the numerous start-ups like OpenAI and Anthropic that are driving most of the chip demand for Mag7, or the reactor companies that don’t even have revenue yet
“Debt levels remained ‘modest’…”
The hyperscalers are taking out record-breaking bond debt, especially Meta and Oracle. That’s before you even get into the mess of private credit and special purpose vehicles
“…credit markets showed ‘no signs of stress’”
Credit default swap spreads for CoreWeave and Oracle are exploding, and for the first time there is now a liquid CDS market for Meta debt
Honestly, it blows my mind that so-called professional investors have such a superficial view of the AI trade. Really makes you doubt there are any adults in the room anywhere
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quote:
A number of investors told the Financial Times they were protecting their portfolios either by reducing their positions or by using derivatives that profit from falls in share prices.
—and alas, no gift for me. But here’s the archive link https://archive.is/wGEvD#selection-1947.0-1947.183
How soon they forget… Look, we’ve seen this movie before. Companies introduce new, revolutionary products, valuations increase, every other firm in the sector tries to jump on the bandwagon, valuations soar, momentum drags everyone along, then boom. It’s over. A few companies with real products survive and prosper but with more realistic valuations and the rest disappear and become the latest Pets.com. 2001, 2008, 2021, this literally happens every few years. The only surprising thing is how people claim to be surprised when it happens again.
From a T. Rowe Price analyst who sees nothing wrong quoted in the article:
“Unlike the dotcom bubble, today’s AI leaders are highly profitable, and much of the valuation expansion reflects rising return on equity”
Except for CoreWeave and the numerous start-ups like OpenAI and Anthropic that are driving most of the chip demand for Mag7, or the reactor companies that don’t even have revenue yet
“Debt levels remained ‘modest’…”
The hyperscalers are taking out record-breaking bond debt, especially Meta and Oracle. That’s before you even get into the mess of private credit and special purpose vehicles
“…credit markets showed ‘no signs of stress’”
Credit default swap spreads for CoreWeave and Oracle are exploding, and for the first time there is now a liquid CDS market for Meta debt
Honestly, it blows my mind that so-called professional investors have such a superficial view of the AI trade. Really makes you doubt there are any adults in the room anywhere