00:00 Speaker A
I was talking about AI fatigue coming into here, seeing some weakness in Nvidia. Barclays out with an interesting note this morning on AI and how big that industry is going and uh, I think you were on a call listening to their uh thesis a little bit more.
00:09 Brooke DePalma
Yeah, I was on a call just now listening to them comparing the AI boom to the dotcom bubble and why it’s not necessarily like the dotcom bubble.
00:20 Brooke DePalma
Uh first of all because the spenders during the dotcom bubble were the telecom companies. They were comparing CapX to sales. They’re saying that right now it’s increased 25%. Back then it was up 40%.
00:36 Brooke DePalma
They’re also saying that the telecoms were depending heavily on debt in the credit markets. Not not so not is the case with the hyper scalers that are flush with cash. And they’re also talking about how hyper scalers are a high margin business.
00:52 Brooke DePalma
And that their operating companies are the operating expenses, I should say, are going up, but their revenue is going up at a faster pace. So Barclays is actually saying that they see a strong footing for the AI theme.
01:03 Brooke DePalma
They don’t see a derailment so to speak for the next 6 to 18 months. Yes, there are risks. Uh yes, they are they also talked about euphoria in the markets. Euphoria in the in the stock market right now is elevated. We all know that.
01:17 Brooke DePalma
But as far as the overall AI theme, when it comes to the hyper scalers, they say that it’s on strong footing.
01:21 Speaker A
Brent, real quick. Final word to you. Do you buy the dips on AI names?
01:25 Brent Shooty
Look, I I I think that likely Barclays is not correct. I I think there are echoes of the .com era. It doesn’t mean they’re exactly the same.
01:33 Brent Shooty
I think the risk is that people have priced it as if Barclays is correct, and that’s where I would encourage people to own things outside of just AI. And so don’t focus only on AI stocks because that is where there is the risk that it doesn’t turn out the the way that people imagine right now, which is already priced into the market, which is at the same levels roughly on many measures as it was back in late 1999.
01:50 Brent Shooty
I would focus instead on cheaper parts of the market because I do think valuation works longer term. I do think history repeats. and I do think you’ll see better days ahead for the average stock in the S&P 500 as well as small and midcap in the US, which trade at relative valuations at the exact same levels as 1999, which ushered in good years ahead for those parts of the market.
02:04 Brent Shooty
Uh and that’s where I would continue to focus on people being diversified and not concentrated.
02:08 Speaker A
I’m feeling that hot take. That’s the hot take I needed on this Thursday morning. Big thanks to my opening bid round table, Brent Shooty, Brooke DePalma, and Anes Ferrel.
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