There are eery comparisions to the dot-com bubble, it is becoming increasingly hard to believe that a rising industry such as the AI one is worth what investors are betting its worth.
Top 5 Positions in the S&P500 index as of as of 11/22/2024.
| Rank | Company | Weight | Price |
|---|---|---|---|
| 1 | Apple Inc. | 6.91% | 232.15 |
| 2 | Nvidia Corp | 6.91% | 136.35 |
| 3 | Microsoft Corp | 6.13% | 418.59 |
| 4 | Amazon.com Inc | 3.64% | 201.47 |
| 5 | Meta Platforms, Inc. Class A | 2.42% | 564.78 |
Now lets look at the P/E of these companies:
- Apple: 38.28x
- Nvidia: 53.76x
- Microsoft: 34.64x
- Amazon: 43.14x
- Meta: 26.67x
“The 10 largest US stocks now account for 33% of the S&P 500 index’s market value, well above the 27% share reached at the peak of the tech bubble in 2000” – Ben Snider, Goldman Sachs
The revenues that these companies are generating are not at all adjusted to the prices at which their stocks are trading at, we are in a overconcentrated and overvalued market environment.
This is exactly what happened in 2001 with the dot-com bubble, companies were trading at absurd levels driven by the speculation that the internet would revolutionize the world and so anyone with a few spare bills dumped them into the market, deeming anything “.com” was good enough.
The same is happening today with AI, we started with NVIDIA and we are still in the honeymoon phase with it, however we are starting to see many other AI related startups and companies, there is a big speculation about this industry and the idea that it will revolutionize the world, altough it most likely will we must have into account that this is the economy we are talking about, and we are talking about fair value.
I would like to read your opinions on this if you are concerned at all and if you believe 2025 will bring a correction to the markets or we continue to fuel up this, so called, “bubble” (dont call me bubble boy).
Thank you in advance.
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