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>Others insist that it is an obvious economic bubble. The definition is that the assets are valuated above an intrinsic value. The first graph is Amazon, Meta

>Others insist that it is an obvious economic bubble. The definition is that the assets are valuated above an intrinsic value. The first graph is Amazon, Meta, Google, Microsoft, and Oracle. Lets check their PE ratio. Amazon (AMZN) ~ 33.6 Meta (META) ~ 27.5 Google (GOOGL) ~ 25.7 Microsoft (MSFT) ~ 37.9 Oracle (ORCL) ~ 65 These are highish pe ratios, but certainly very far from bubble numbers. OpenAI and others are all private. Objectively there is no bubble. Economic bubble territory is 100-200+ PE ratios. Not to mention, who are you to think the top tech companies arent fully aware of the risks they are taking with AI?

randomtoast 1y ago
The thing is, if you say that "AI is a bubble that will pop" and repeat this every year for the next 15 years, then you have a good probability of being right in 1 out of 15 cases if there actually is a market recession within the next 15 years that is attributed to AI overspeculation.
Atomic_Torrfisk 1y ago
> Not to mention, who are you to think the top tech companies arent fully aware of the risks they are taking with AI? Well 2008 happened too and people weren't too concerned with risk either.
ajross 1y ago
> Objectively there is no bubble. Economic bubble territory is 100-200+ PE ratios. Not sure I buy that analysis. That was certainly true in 2001. The dot com boom produced huge valuations in brand new companies (like the first three ones in your list!) that were still finding their revenue models. They really weren't making much money yet, but the market expected them to. And... the market was actually correct, for the most part. Those three companies made it big, indeed. The analysis was not true in 2008, where the bubble was held in real estate and not corporate stock. The companies holding the bag were established banks, presumptively regulated (in practice not, obviously) with P/E numbers in very conventional ranges. And they imploded anyway. Now seems sort of in the middle. The nature of AI CapEx is that you just can't do it if you aren't already huge. The bubble is concentrated in this handful of existing giants, who can dilute the price effect via their already extremely large and diversified revenue sources. But a $4T bubble (or whatever) is still a huge, economy-breaking bubble even if you spread it around $12T of market cap.

randomtoast 1y ago

The thing is, if you say that "AI is a bubble that will pop" and repeat this every year for the next 15 years, then you have a good probability of being right in 1 out of 15 cases if there actually is a market recession within the next 15 years that is attributed to AI overspeculation.

Atomic_Torrfisk 1y ago

> Not to mention, who are you to think the top tech companies arent fully aware of the risks they are taking with AI? Well 2008 happened too and people weren't too concerned with risk either.

ajross 1y ago

> Objectively there is no bubble. Economic bubble territory is 100-200+ PE ratios. Not sure I buy that analysis. That was certainly true in 2001. The dot com boom produced huge valuations in brand new companies (like the first three ones in your list!) that were still finding their revenue models. They really weren't making much money yet, but the market expected them to. And... the market was actually correct, for the most part. Those three companies made it big, indeed. The analysis was not true in 2008, where the bubble was held in real estate and not corporate stock. The companies holding the bag were established banks, presumptively regulated (in practice not, obviously) with P/E numbers in very conventional ranges. And they imploded anyway. Now seems sort of in the middle. The nature of AI CapEx is that you just can't do it if you aren't already huge. The bubble is concentrated in this handful of existing giants, who can dilute the price effect via their already extremely large and diversified revenue sources. But a $4T bubble (or whatever) is still a huge, economy-breaking bubble even if you spread it around $12T of market cap.