No, AI is Not A Bubble [View all]
Economics are often like an Escher drawing -- individual parts make sense but when you put it all together it is absurd. Yet, like the ever-ascending staircases, indexes continue to rise. As the saying goes 'Markets can remain irrational longer than you can remain solvent.' IOW don't bet against long term growth.
2007/2008 was a bubble because banks took the position that the value of real estate could not go down. A Ponzi scheme has no underlying business. A bubble is prices decoupled from underlying valuations. AI is neither of those.
NVDA via their CUDA API has been the fundamental layer on which AI was built for 20 years. Now there is no getting away from it.
TSM and AMAT feed directly into Nvidia's monopoly. They have a position from which they cannot be dislodged.
Downstream from these three and growing rapidly is the introduction of nuclear power which cannot be a bubble because electric rates are soaring so even if AI went away tomorrow, nuclear power (FRMI, IMSR) would remain profitable.
NVDA has a market cap of $5 trillion dollars but is still only trading at 59 P/E. Crazy but true. Earnings are $84 billion and growing at 120% YoY meaning that the price of NVDA could double in the next 12-month and still wind up lower than 59 P/E.
The narrative about "AI is Bubble" is helping NVDA consolidate its hold on the future. By introducing and amplifying skepticism, competitors are disadvantage at the very time that the AI ship is leaving the dock. Retail investors are being encouraged not to bid up prices while hedgies and financials load up.
https://www.marketwatch.com/investing/stock/nvda/financials?mod=mw_quote_tab
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