"In a real bubble, the weakest fundamentals can command the highest prices. The most speculative names fly highest. SoundHound AI is the tell. In a true bubble, SOUN would be parabolic. Instead, it is down 32% year-to-date and off 66% from its January 2025 peak."
"Alphabet committed roughly $180 billion in capex. Amazon guided to approximately $200 billion. Meta is spending $115 to $135 billion. Microsoft spent almost $30 billion in capex in a single quarter, up 89% year-over-year. This is operating cash flow from the most profitable businesses humanity has ever produced."
"Nvidia generated $34.9 billion in free cash flow in a single quarter. Its data center networking revenue grew 263% year-over-year as customers locked into full-stack NVLink infrastructure. Yet Palantir is down 21% year-to-date. In dot-com, everything went up together. Here, the market is sorting winners from losers in real time."
The AI infrastructure buildout is being funded by significant capital expenditures from major tech companies rather than speculative investments. Companies like Alphabet, Amazon, Meta, and Microsoft are committing substantial amounts to capex, indicating strong fundamentals. Unlike a typical bubble where weak fundamentals drive high valuations, the market is currently differentiating between successful and unsuccessful investments. While risks such as concentration and geopolitical tensions exist, the current phase represents a generational infrastructure buildout supported by cash flow from profitable businesses.
Read at 24/7 Wall St.
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