00:00 Speaker A
Are we witnessing another tech stock bubble? I put this to Apollo chief economist Torsten Slok. Here’s what he said.
00:09 Torsten Slok
I do think that we’ll have a lot of growth, but it looks somewhat extreme to me that the valuations for those significant big stocks in the S&P 500 which make up such a big share of the overall S&P 500 is at these very high levels relative to where we were in the IT bubble where the valuations of the 10 biggest companies in the S&P was a lot lower. So, I do think that there is a bubble from a PE ratio perspective, because these companies have just become so expensive and it’s become so concentrated for investors that it’s really no longer diversified investment to buy the S&P 500.
00:56 Speaker A
All right. Still with me is my round table Chad Morganlander of Washington Crossing Advisors and Yahoo Finance senior reporter Alexandra Canal. And Ines Ferre. Chad, over to you on this one. You never know if you’re in a bubble until after the fact, right?
01:10 Chad Morganlander
Yeah, correct. And in fact, uh, your, your clip there was correct. Uh, you are sitting at a 23 multiple. So you during the earlier stages of a bubble. Living through the 90s, one must recall that the S&P earnings or PE multiple got over 30 times, uh, in 1999. Uh, so there will be, look, when you look back at this time, there will be a lot of mal investment made, some silly investment ideas that, that didn’t work out. But over the long run, over the next 10 to 15 years, uh, this excitement about artificial intelligence is justified. It’s just a matter of the, the, the, the valuation gap and where that valuation gap meets, uh, the reality of, of earnings.
02:15 Speaker A
Well, it sounds like, Chad, if you want to compare it to the internet craze, we still have more to go in terms of valuations, at least from a PE perspective.
02:24 Chad Morganlander
Well, that could be true. Uh, again, you know, buyer beware on the type of companies that you’re buying. Uh, at Washington Crossing Advisors, we own Alphabet, for example. That’s trading at roughly about a 17 times multiple when you look at, when you take, when you take away cash. Um, full disclosure, not only do we own it in our portfolio, but I personally own it. But that company has a full competitive stack to go against OpenAI.
03:03 Speaker A
Ines, I haven’t covered a good bubble in a while. Uh, the last one I covered was cannabis a couple years ago. Every day, cannabis stocks would go up until, well, they did it. Maybe it’s time, uh, we do get a bubble bursting and maybe it does start with AI.
03:24 Ines Ferre
And we could, for sure. Uh, this is probably different than cannabis, uh, because it is touching all sorts of industries. I mean, if you take a look right now at the different sectors of the S&P 500, you are seeing industrials, which is leading the way. Think big construction, factories, AI centers. Uh, you’re seeing tech. You’re seeing utilities, which is usually the sleepy part of the market. Utilities is, uh, outperforming the broader market. And then, of course, you’re seeing financials as well. So you can tell that it is touching all parts of the market right now. And if you think in the future, like what Chad was saying earlier, um, look, long term, this will be a huge productivity boom for the entire economy. Uh, because just imagine having endless amounts of workers at your disposal, endless amount of AI bots that are doing work for you. And this is not just about AI bots, then you’re talking about, uh, later on, having robots doing everything. I mean, this is going to be a massive, massive productivity move. But yes, we could be in a bubble right now. We will see, we would see it deflate, but then we would see, uh, exponential growth.
05:03 Speaker A
Right on, Ines. I need a thousand personal digital assistants. Thank you. Thank you. And I’m going to get those someday because of AI.
