No. of Recommendations: 3
Agree the Mag 7 doesn’t compare to .com
However, caution is warranted perhaps.
The AI capex is not going through the P&L accounts, or operating cashflow and is being depreciated over quite long time frames. See Meta’s cash burn.
Also see Microsoft’s declining margins.
The other side of this AI capex are Nvida’s revenues. What if it all slows down.
Tesla is not generating significant cashflows and looks quite vulnerable for a variety of reasons. Certainly you have to believe in a lot of future promises to go right to justify 90% of the company. Probably the black sheep of the Mag 7.
Alphabet’s search dominance is evolving with the introduction of AI. Might be good, might not.
Amazon is doing well but it’s expensive for a retailer.
Apple is a strong company but has not been able to grow much of late and looks more like a large cash cow.
I agree it’s not like some kind of super bubble that drops 80%, but it is an expensive group and hard to see good returns from here, given the changing competitive landscape of AI and the huge capex.
The crypto and in particular the crypto treasury companies raising money to buy more and more crypto, does however look very much like an unsustainable bubble that will burst in dramatic fashion.
Private equity also looks shaky with its internal valuations and struggles to sell on assets after having stripped them bare.
I guess it all continues for as long as inflation stays under control and interest rates stay reasonable. We will find out in due course.
Berkshire cash pile is an incredible amount of fire power if the wheels come off.
