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Is Mega-Tech A Bubble? (Probably Not)
Are US tech shares a bubble in 2023?
If you can answer that question correctly, congratulations: You have the keys to a fortune and, more importantly, you're apparently possessed of deep insight into the viability (or not) of generative A.I. as a world-changing technology.
There are a number of salient questions facing investors this year, and if you had to make a list that didn't involve speculating on whether the US and China will ultimately end up at war, the top two spots would almost inva
I still am eagerly awaiting reports of CEOs crowing about how the use of AI has allowed them to reduce their headcount. Verus the obligatory “we’re excited about is and are looking into it” statements.
Money makes the world go round! Cash money on the counter.
Good question, sir. Just how should we value AI as it is being used or contemplated today? Is it cash money on the counter? I hope that’s not all there is (I’m still a Peggy Lee fan). One of the problems over the past couple decades is that we can’t seem to find out what the whole IT fuss was about. It was supposed to be creating higher productivity but how do we parse our profits to see whether that’s really true? Was the real value in some kind of increased capability to make great decisions (seemingly not in government at least)? If so, how do we know? Where’s the beef? Basing market value on fundamentals will be tough in the long run if we can’t measure this value.
A couple of the big cap techs are trading at 19-20X PE NTM. With their margins and cash generation, 19-20X is clearly not a “bubble” valuation. It may be too high or too low, depending on one’s views on growth, but that’s the normal market debate. A couple others are trading at very different valuations, that do look “bubbly”.