Are we in a bubble?

[Gregmal]

28 minutes ago, kab60 said:

A lot of the earnings are circular though.

 

Nvidia books earnings upfront, customers depreciate these things over 5-7-10 years. Of course you get a massive spike in earnings. Question is what follows. Sure dotcom had silly companies, but take a look at Tesla/SpaceX. The magnitude is beyond anything we have ever seen.

Yea I think this is 1999 new tech enthusiasm, coupled with a covid earnings type phenomena occurring thats giving folks excuses to justify paying for it. I mean even at the highest levels, Bill Ackmans basically running a closet MAG7 fund and Dan Loeb just pitched NVDA as cheap. 

[Spekulatius]

10 hours ago, 73 Reds said:

Yeah but dot com was worse.  At least AI companies generate sales and earnings.  Some of you may not have been around  but literally anything not related to tech was left for dead and 401k "millionaires" all believed they were investment geniuses; who needed stocks that didn't go up 10%/week?     

OpenAI and Anthropic almost certainly don’t  make money, but they have sales. The companies that did do the  buildout like JDSU, Cisco, Ciena (note they are all back now) did make money and lots of it.

 

Where do you see the difference?

 

We have now SPCX, a bunch of quantum computing  stocks (zero revenue ). Memory prices  up 4-5x  (worse than in the dot do boom when they also went up but for less). AI Capex as a percentage of GDP is 2-3x the % of Capex we had during the fiber optic boom. So I am not sure the dot com boom was worse. I think what we currently have is bigger.

[tnathan]

On 5/20/2026 at 1:56 PM, Red Lion said:

 

On this subject I just read an opinion piece somewhere (maybe WSJ or Bloomberg?) which was saying small caps and emerging markets may be the best way to play the AI wave as there is the most room for margin expansion, and these tools are being made available to everyone (not just Fortune 500 companies). 

 

I found it to be an interesting thesis, this article was suggesting indexes rather than actual companies, but I'm sure there may be lots of smaller less efficient companies that can really improve their productivity and margins with AI tools. 

AI will only increase margins for companies in industries where competitive intensity is low / where the company already has a moat. If a bunch of retailers all use AI to cut headcount needs, ultimately those savings will be passed to consumers if there is a lot of competition. Small caps in general tend to have less moats, so wouldn't be surprised if in the medium and longer term this didn't happen.

[kab60]

4 hours ago, tnathan said:

AI will only increase margins for companies in industries where competitive intensity is low / where the company already has a moat. If a bunch of retailers all use AI to cut headcount needs, ultimately those savings will be passed to consumers if there is a lot of competition. Small caps in general tend to have less moats, so wouldn't be surprised if in the medium and longer term this didn't happen.

That's my working assumption as well. It's not like department stores became more profitable when the escalator was invented. Everybody eventually adopted it, and consumers enjoyed the surplus. That seems to be the way it goes with new technology in most industries. Obviously with the caveat that execution matters, and some will be better and worse at adapting.

 

I've been buying a lot of Autotrader in UK - an online marketplace for used car, which is basically a monopoly and a royalty on used car sales ( @changegonnacome that's one example of a good business at ~10x '26 profits assuming they keep up the buyback at these levels. They bought 0.6% of shares last week...). I didn't buy Autotrader because of AI, but I think they're an example of a business that should be able to keep some of the economic gains for itself. Both directly, on the cost side, but also in the form of launching more features/increased product velocity, which improves ability to take price.

 

In the same vain, I think investors sometimes focus overly much on new technology vs. the power of distribution/sticky installed base. If AI increases product velocity meaningfully, it should help (well-run) companies with a large installed base of customers but perhaps not the best tech/product. Everything is tbd, but that could be someone like Global Payments.

 

 

[John Hjorth]

12 hours ago, SharperDingaan said:

+1

 

The only reason we're punting on SpaceX is because we're sure we can rely on the greed. A great deal of money rests on this historic trillion dollar IPO not only doing well, but also closing the day at well above the issue price. A material bump that also bumps the indices, and opens the way for those lined up behind it .... and the fees that come with it.  Heaven and earth moved to ensure that nothing threatens it.

 

The GFC demonstrated that excessive fee income corrupted the judgement of rating agencies and associated analysts. We would expect that the same thing is happening here.

 

SD

 

Yeah, tell us about it, SD [ @SharperDingaan ],

 

Just a tiny report from the European side of the Atlantic pond here - a screen shot of the entry page in the app for my primary investment bank :

 

I certainly haven't signed up for getting spammed like this, in fact I find it appalling, and insulting in a way. It's all about attracting more money and new customers. I'll file a complaint by phone tomorrow about it.

 

From what I have read, the sale is handled here in Europe by :

 

Nordnet Bank,

Saxo Bank,

Interactive Brokers &

Revolut.

Edited 3 hours ago by John Hjorth
Fixed some typos

[frommi]

These banks must get big fees, i also get spammed a lot.

[SharperDingaan]

1 hour ago, frommi said:

These banks must get big fees, i also get spammed a lot.

 

Assume 1% of the total raise .... an awful lot of bribe money spread about, and the largest commission of the entire year. But ... it has to be successfull.

 

SD

 

 

[Spekulatius]

47 minutes ago, SharperDingaan said:

 

Assume 1% of the total raise .... an awful lot of bribe money spread about, and the largest commission of the entire year. But ... it has to be successfull.

 

SD

 

 

What does success mean though?  If it gets issues at $135 and all the shares are sold, then it stays to $135 the same day and keeps dropping to $80 in the coming month, the offering was successful for Elon, the underwriting banks. It just wasn’t a good investment for the participants.

 

This happened with the Facebook IPO by the way and that was way cheaper but similarly hyped.

[SharperDingaan]

1 hour ago, Spekulatius said:

What does success mean though?  If it gets issues at $135 and all the shares are sold, then it stays to $135 the same day and keeps dropping to $80 in the coming month, the offering was successful for Elon, the underwriting banks. It just wasn’t a good investment for the participants.

 

This happened with the Facebook IPO by the way and that was way cheaper but similarly hyped.

 

There is a need to hype the market for those IPOs that follow, and ensure that price doesn't fall below the underwriters guarantee for the two week period following launch day.

 

Intentionally underprice the IPO so that it pops 30%+ on issue day. Apply the marketing engine to drive price up 100% within the two weeks following. Creation of an options market to sell puts to investors, and calls to speculators.

 

Not their problem if investors don't address their elevated risk, whether it is via the stock itself, the indices that are forced to buy it, or the options market.

 

Of course, if a Spacex launcher now explodes on the pad .... it is 'kaboom' in more ways than one. So .... no launches for the next few weeks ... and 'controlled video'.

 

There are ways around the indices problem. Back in the day we had Nortel, and later RIM, doing the same thing.

 

Shitty way of doing business, but one can either vent, or use the opportunity. Just keep the greed in check, and ensure that you engage a mechanism by which to keep the funny money.  Most will not, and piss it away .... believing they are invincible.

 

Another opportunity to harvest.

 

SD

Edited 32 minutes ago by SharperDingaan

[John Hjorth]

3 hours ago, frommi said:

These banks must get big fees, i also get spammed a lot.

 

2 hours ago, SharperDingaan said:

Assume 1% of the total raise .... an awful lot of bribe money spread about, and the largest commission of the entire year. But ... it has to be successfull.

 

SD

 

I simply had to dig in, to find some information about it!  [Getting appalled now and then keeps the blood pressure up! ]

 

Prospectus, p. 47 & 48 :

 

 

That's not that bad, is it? 

 

Then I started studying the specification further.

 

USD 700 K in printing costs related to bringing mankind out in the galaxy gave me a good laugh!  [<-John, the nitpicker!]

 

Impressive part of that sum to helpers [accountants and attorneys] : USD 37,700 K!

 

Then I stumbled and focused on the USD 4,000 K figure related to the European retail offering, combined with that this post releates only legal fees and expenses!  -So, where are all the bank fees in specifification? Then I started reading paragraph 3.2. from the beginning, from top to end, and realized to get information about bank fees and commisions, I had to read paragraph 8.3.2 , ref. :

 

Quote

... For more information on discounts, commissions and expenses, please refer to “8.3.2 Underwriting Discounts and Commissions”. ...

 

Beginning of paragraph 8.3.2 :

 

Quote

8.3.2 Underwriting Discounts and Commissions

 

The Company and the underwriters have not yet agreed on the underwriting discounts and commissions. The underwriting discounts and commissions will be determined by the Company at pricing and will be agreed with the underwriters in the underwriting agreement. The Company expects that the total underwriting discounts and commissions for the global offering will be approximately $500 million. ... 

 

- - - o 0 o - - -

 

When Bernard Arnault in August presents half year results for LVMH, I expect him talking about the experience of a sudden temporary spike in the sales of champagne just after the IPO of SpaceX!

 

- - - o 0 o - - -

 

Warner Bros. Entertainment [January 22^nd 2013] : Cabaret | "Money" Musical Number | Warner Bros. Entertainment

 

 

Edited 33 minutes ago by John Hjorth

[SharperDingaan]

Great choice of video! For all those 'helpers' ... Master of the house, Les Miserables

 

SD