This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Can we stop with all this AI bubble talk, please?
I get it.
Those hunting for a dot-com style stock market explosion want to make names for themselves by predicting a bubble. Who doesn’t want the fame and fortune associated with being right in a big way?
Who doesn’t want to spend a month reporting on stocks going down 75% because of a freak warning out of Nvidia (NVDA) and OpenAI (OPAI.PVT)?
Entire years could be made for content platforms in a week if the stock market were to get blown up because of a Lehman-like meltdown in tech valuations. If you are over the age of 40, you remember the trading screens during the height of the great financial crisis. Massive declines, a full-on sea of red. Every. Single. Day.
But I’m here to say we have to give these AI bubble predictions a rest. Ditto the predictions that we are in a tech bubble. It’s just not what’s happening out there yet.
First of all, AI is a real technology being deployed in real ways inside of Corporate America.
Second, this technology is requiring more physical assets in the ground — which are being built to support AI’s real-world application. What Zach Dell (son of Michael Dell) is working on at startup Base Power (which just raised $1 billion) impressed me this week. It’s addressing a key issue —power availability and costs in part because of rising stress on the grid due to AI development.
Next, the spending on AI infrastructure doesn’t strike me as reckless.
I talk to CFOs and they walk me through their thinking, which seems logical. They aren’t foaming at the mouth with wild-eyed predictions of grandeur similar to the late ’90s.
Plus, the tech giants making the biggest AI investments are fueling their ambitions by cash on hand — not loading up balance sheets with debt. The upstarts in AI are well funded, not being 100% stupid in their organizational build-outs. They’re working on tangible technology that has actual orders behind it.
“I would say that’s probably thinking too small,” AMD (AMD) CEO Lisa Su told me about concerns of AI overspending this week (video above). “You have to really look at what the power of this technology can do for the world.”
AMD is “investing at the right pace because we want to accelerate … this is a place where [and] when companies and partners make bold moves, it will be rewarded.”
Who am I to argue with Su, who may go down as one of the best tech CEOs of all time? What she has done at AMD since joining in 2012 is mind-blowing.
Lastly here in my scolding of the AI worrywarts is that valuations don’t support the warning calls.
According to new research out of Goldman Sachs this week, the median forward P/E ratio across the Magnificent Seven is 27 times, or 26 times if excluding Tesla (TSLA), which has a much higher multiple than the other companies. This is roughly half the equivalent valuation of the biggest seven companies in the late 1990s, while the dominant companies in Japan (mostly banks) traded at higher valuations still.
What’s more, the current enterprise-to-sales ratios are also much lower than those of the dominant companies in the late 1990s.
“So it is true that valuations are high but, in our view, generally not at levels that are as high as are typically seen at the height of a financial bubble,” said Goldman Sachs strategist Peter Oppenheimer.
I couldn’t agree more, Peter.
Programming note: I am headed out to San Francisco today for Salesforce’s (CRM) annual Dreamforce event that kicks off unofficially on Monday. Surely I will get asked 700 times by people on the ground if I’m seeing an AI bubble. And surely I will ask 700 people if they are seeing an AI bubble. I suspect I will return with the same view as shared here, though.
Nonetheless, I have a host of big interviews on tap at Marc Benioff‘s Dreamforce — which is always a who’s who of global tech leadership. And hey, even Benioff’s friend Matthew McConaughey is expected to be there again. What’s not to like about this one: movie stars, AI agents, bubble fears, and cute Salesforce mascots running around for photo ops. My version of a good time nowadays.
Those interviews start dropping Tuesday on Yahoo Finance!
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Can we stop with all this AI bubble talk, please?
I get it.
Those hunting for a dot-com style stock market explosion want to make names for themselves by predicting a bubble. Who doesn’t want the fame and fortune associated with being right in a big way?
Who doesn’t want to spend a month reporting on stocks going down 75% because of a freak warning out of Nvidia (NVDA) and OpenAI (OPAI.PVT)?
Entire years could be made for content platforms in a week if the stock market were to get blown up because of a Lehman-like meltdown in tech valuations. If you are over the age of 40, you remember the trading screens during the height of the great financial crisis. Massive declines, a full-on sea of red. Every. Single. Day.
But I’m here to say we have to give these AI bubble predictions a rest. Ditto the predictions that we are in a tech bubble. It’s just not what’s happening out there yet.
First of all, AI is a real technology being deployed in real ways inside of Corporate America.
Second, this technology is requiring more physical assets in the ground — which are being built to support AI’s real-world application. What Zach Dell (son of Michael Dell) is working on at startup Base Power (which just raised $1 billion) impressed me this week. It’s addressing a key issue —power availability and costs in part because of rising stress on the grid due to AI development.
Next, the spending on AI infrastructure doesn’t strike me as reckless.
I talk to CFOs and they walk me through their thinking, which seems logical. They aren’t foaming at the mouth with wild-eyed predictions of grandeur similar to the late ’90s.
Plus, the tech giants making the biggest AI investments are fueling their ambitions by cash on hand — not loading up balance sheets with debt. The upstarts in AI are well funded, not being 100% stupid in their organizational build-outs. They’re working on tangible technology that has actual orders behind it.
“I would say that’s probably thinking too small,” AMD (AMD) CEO Lisa Su told me about concerns of AI overspending this week (video above). “You have to really look at what the power of this technology can do for the world.”
AMD is “investing at the right pace because we want to accelerate … this is a place where [and] when companies and partners make bold moves, it will be rewarded.”
Who am I to argue with Su, who may go down as one of the best tech CEOs of all time? What she has done at AMD since joining in 2012 is mind-blowing.
Lastly here in my scolding of the AI worrywarts is that valuations don’t support the warning calls.
According to new research out of Goldman Sachs this week, the median forward P/E ratio across the Magnificent Seven is 27 times, or 26 times if excluding Tesla (TSLA), which has a much higher multiple than the other companies. This is roughly half the equivalent valuation of the biggest seven companies in the late 1990s, while the dominant companies in Japan (mostly banks) traded at higher valuations still.
What’s more, the current enterprise-to-sales ratios are also much lower than those of the dominant companies in the late 1990s.
“So it is true that valuations are high but, in our view, generally not at levels that are as high as are typically seen at the height of a financial bubble,” said Goldman Sachs strategist Peter Oppenheimer.
I couldn’t agree more, Peter.
Programming note: I am headed out to San Francisco today for Salesforce’s (CRM) annual Dreamforce event that kicks off unofficially on Monday. Surely I will get asked 700 times by people on the ground if I’m seeing an AI bubble. And surely I will ask 700 people if they are seeing an AI bubble. I suspect I will return with the same view as shared here, though.
Nonetheless, I have a host of big interviews on tap at Marc Benioff‘s Dreamforce — which is always a who’s who of global tech leadership. And hey, even Benioff’s friend Matthew McConaughey is expected to be there again. What’s not to like about this one: movie stars, AI agents, bubble fears, and cute Salesforce mascots running around for photo ops. My version of a good time nowadays.
Those interviews start dropping Tuesday on Yahoo Finance!
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
