No. of Recommendations: 17
Since Alphabet is the bell of the ball, I thought you might enjoy ;-)
Everyone has heard of the Magnificent Seven— the tech titans that have driven the market to record highs, fueled most recently by the irresistible allure of artificial intelligence (AI). However, since we never went for a backseat drive in any of the Tesla models (S-3-X-Y) due to valuation, let’s focus on the subset of the Magnificent Seven that we do own. We will rebrand them the “Sexy Six”– Alphabet (Google), Apple, Amazon, Meta Platforms, Microsoft and Nvidia.
Together, the Sexy Six comprise about 35% of the S&P 500’s total market capitalization, which is why they keep turning heads. Nvidia recently became the first company to strut over the $4 trillion market cap runway with Microsoft sashaying close behind.
Picture them at the stock market’s Met Gala. Nvidia commands the room dressed in sleek black and adorned with the latest, most coveted AI chip designs – the ultimate status symbol. Microsoft, clad in a chic cloud-inspired ensemble, whispers about AI dominance.
Meta, having undergone a metaverse makeover, lounges with stylish Ray-Ban smart glasses, chatting animatedly about superintelligence across Facebook, Instagram and WhatsApp. Alphabet, ever attractive, listens thoughtfully but is ready to slip out and hail a Waymo ride, confident that its Google search engine and Gemini twin hold the keys to AI success.
Meanwhile, Amazon, sporting a bold jungle-print, drums up excitement about its AI leadership while simultaneously plotting world retail domination. Apple, fashionably late to the AI party but consistently reliable in a classic little black dress with subtle twists, promises a cool AI reveal soon. Apple aims to enhance the ecosystem spanning its 2.3 billion devices.
Driven by innovation, market leadership and massive investments in AI, the Sexy Six have enjoyed impressive gains and enviable valuations backed by surging sales, earnings and cash flows. Each anticipates strong future returns on their multibillion-dollar AI investments as they race to meet insatiable demand.
But, are the Sexy Six overvalued? That remains the trillion-dollar question. Some skeptics raise perfectly sculpted eyebrows, concerned about potential bubbles and the fickleness of tech trends, which could lead to a stumble. The Sexy Six also continue to face intense antitrust and data privacy scrutiny globally, which could impact their operations and profitability.
We continue to admire the robust business fundamentals of the Sexy Six. However, from a valuation standpoint, our dance card varies. Alphabet stands out as the bell of the ball thanks to an attractive valuation. Amazon and Microsoft still have room to spin up some nice returns given reasonable valuations. Nvidia and Meta appear a bit breathless after their dazzling quickstep and might benefit from sitting out the next dance. Meanwhile, Apple, a recent wallflower, could soon return to the dance floor if its Siri overhaul and other AI initiatives meet expectations.
In the high-stakes AI dance, the Sexy Six continue to strut their stuff. However, valuations will ultimately determine when the party is over. For smart, long-term investors, the best dance move may be to pocket some profits before a stumble from high-heeled valuations.
No. of Recommendations: 7
I get a kick out of your posts, they are always fun to read.
On topic, the other day, Sam Altman warned we might be in an AI bubble, comparing it to the tech bubble:
https://nypost.com/2025/08/18/business/openai-ceo-...He could be right, but the thing about the tech bubble is that everyone who believed the Internet would transform the world was spot on. The companies they bet on might have been wrong, but they were right about the upside.
As a layman, it seems AI is more incremental that transformative. Simple sports and finance stories have been computer generated for a long time. Now AI is generating legal briefs, which is incredibly impressive, but you can kind of connect the dots between the two. And progress doesn't seem guaranteed. ChatGPT 5 was a flop, for instance.
Again, as a layman I'm still waiting for the killer AI app. But I think the killer app really will be a killer. When VisiCalc, the first killer app, was introduced, many people had to first buy the computer to run the software. To use Netscape you needed an Internet connection. But today everybody has an Internet connected computer in their pocket. ChatGPT went from zero users to 100 million in two months. If one of these companies can figure out an app that everybody needs, it could be enormous very quickly.
No. of Recommendations: 4
I'm starting to wonder whether two divergent winning paths may be possible among the Sexy Six in the AI data center buildout race:
--One or two of them win that race and take most of the available profit (if any); and
--The first of them to fold on its giant capex spend also wins, similarly to Meta with its big metaverse capex reduction a couple years ago.
