Bonfire of the Vanities
quietus writes:
"When the music stops ... but as long as the music is playing, you've got to get up and dance."
(Charles "Chuck" Prince, Citigroup CEO, July 2007, FT interview)
About 85 percent of US GDP. That has been the average total value of all US stocks since 1970. Warren Buffett once described this as "probably the single best measure of where valuations stand at any given moment".
On Tuesday,October 28, that value reached 220% of US GDP.
US stocks are trading at extreme levels, notes the Financial Times. Price to earnings ratios for the S&P500 are at a 25 year high; price-to-sales ratios are higher than before the dotcom bust.
AI companies are almost entirely to blame, with a focus on the Magnificent Seven: Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla. Microsoft, for example, took 35 years to reach a dazzling trillion dollar valuation, in 2021. Just 4 years later it trades at 4 trillion dollar. That valuation comes on top of impressive infrastructure investment numbers: Google, Amazon, Meta and Microsoft, for example, plan to spend more than $400bn on data centres in 2026, on top of more than $350bn this year.
Notes the article, wryly:
some investors seem to have discounted the notion that AI might prove anything less than earth-shatteringly revolutionary
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