seekingalpha.com
If is easy to get exposure to the AI bubble if you want. The trickier thing is to identify companies that will be strong across the bust and into the long secular AI build out that follows. To draw an analogy with the 1999 bubble, you want to own Amazon, not Pets.com.
On the software side, Palantir is probably one of the long-term winners. I'd be a lot more interested in buying them after a crash than I am here, though. Kudos to people who got in under $50. On the hardware side, both AVGO and NVDA are looking like solid values here. They don't need the hypergrowth to continue indefinitely to justify their multiples - they merely need to hit their 2026 targets, and after that should be fine even if growth slows to the upper teens (a level the sector is likely to sustain for a long time).
If this is really a bubble and it bursts, they'll probably see a "wipeout" year of writeoffs and zero reported EPS, but that isn't a concern to me. Their earnings will recover from that and the share price will (perhaps after a couple years) rebound to justify the current levels.
Can't say the same of some of the highly leveraged data center plays out there. Too many of them are counting on contracts being fulfilled to pay the bills, on contracts being profitably renewed to make their numbers work. Much of the debt is "off the books", using accounting tricks that at their heart are an echo of Enron, but "off the books" debt can bring a company down just as easily as debt that is acknowledged.
The "picks and shovels" businesses profited from the Gold Rush, not businesses that were buying up site leases and not (in most cases) the miners themselves. There is of course a possibility that this isn't really a bubble, that it is a sheep in wolf's clothing (though one would wonder why a sheep would want to dress like a wolf?), but for me the smart move is to aim for investments that will pay off regardless of whether this is or isn't a bubble.
GLTA |
