The Hidden Risk Behind Today’s AI Stock Boom

During their recent episode, Taylor, Carlisle, and Ross Glotzbach discussed The Hidden Risk Behind Today’s AI Stock Boom. Here’s an excerpt from the episode:

[Ross] But now you’ve got really big questions on the E that is being capitalised in, you know, the current S&P 500, 2120- The big P. You want to call it, because number one, there’s this massive capital spending that is going on and people say, oh, well, this company is at 20 times earnings, it’s at 25 times earnings. They haven’t grown their, like, you know, a lot of these, we were going through our favourite acronyms for these companies earlier, but a lot of these big five to 10 internet digital tech companies, again, great companies, I think we’d all want to own them at the right price, but their actual free cash flow per share over the last three or so years hasn’t been very good.

And it’s kind of gone to a lot of these semiconductor companies, which are printing huge earnings, but these are semiconductors. They go up and down all the time. And 10 times earnings at, you know, pick your stock, that’s one of these, Micron, et cetera, Nvidia is 20 times, but that E on that 10 or that 20, that could be off by multiples.

And that could be, you know, something that’s coming. And we’re glad that we don’t participate in that today. Of course, we should have participated in it over the last 12 months, but we didn’t.

And we’re not gonna today.