As the AI trade gets overheated and calls for some sort of bursting of the AI bubble grow louder, it might make sense to look to opportunities to be had within other sectors. Undoubtedly, the AI-fuelled tech boom may very well continue for another year or more, as the firms strive to be among the first to achieve some form of artificial general intelligence (AGI). Still, there's no denying that the stakes are higher, along with valuations.
The company is seeking a $1.5 trillion valuation - the richest listing in history, per Bloomberg. Combined with other possible listings, Bloomberg estimates that as much as $2.9 trillion worth of private companies could go public next year. Other AI-linked "centicorns" - companies valued at $100-billion plus-are reportedly weighing listings, including Databricks and Anthropic. OpenAI has an implied valuation of over $500 billion, fueling speculation about a future stock listing, though it has attempted to tamp that down.
Mega cap tech stocks have continued to be the key growth engine for the U.S. economy. For many young investors that started investing after the great financial crisis, this has been the way it's been for as long as can be remembered. That said, the reality is that we're living in a much higher valuation environment today than we've seen in many years. And it's also true that over the very long-term, valuations will eventually revert toward some sort of equilibrium level.
When people get very excited, as they are today about artificial intelligence for example, is every experiment gets funded, every company gets funded, the good ideas and the bad ideas, Bezos said, pointing to companies getting billions of dollars of funding before they have a product. Investors have a hard time in the middle of this excitement distinguishing between the good ideas and the bad ideas.
The S&P 500 is wandering into uncharted territory as it looks to wander above the 6,500 mark going into the last four months of the year. It's never been so concentrated at the top, and with valuations on the rise (it may find itself closing in on a 30 times trailing price-to-earnings (P/E) multiple), some wonder if the SPDR S&P 500 ( NYSEARCA:SPY) is overdue for a correction.
