![]() ![]() But some investors just can’t make it make sense. Just about everyone seems to love this stock, for good or for ill. Wall Street analysts are overwhelmingly positive on Nvidia. This is most likely due to being offline or JavaScript being disabled in your browser. You are seeing a snapshot of an interactive graphic. ![]() Voice-assistant company SoundHound and medical device specialist Nano-X leapt more than 50 per cent. News this week that it had bought stakes in a clutch of other AI-related companies sent their stocks soaring. Anything that Nvidia touches turns to gold. The stock is up 50 per cent so far this year (it’s only February!) and it trades at a price to trailing earnings ratio approaching 100 times. In fact, there’s a decent argument that Microsoft stock is a haven asset at this point rather than any kind of speculative bet.īut the runaway performance of chip designer Nvidia is starting to jangle nerves. Before that was the Nifty Fifty, and the Roaring Twenties before that, and the Railway Mania, and the South Sea Bubble, and John Law’s Folly, and Tulip Mania and so on.” None of them ended well.Ĭlearly, Microsoft today is not the of 1999 - perhaps the most famous flash-in-the-pan failures of that era. For most of us, the dotcom boom happened during our lifetimes. “New era thinking is certainly not new, and eye-watering valuations on stocks with a compelling narrative behind them is a tale as old as time. “We’ve been here before,” said macro strategist Benjamin Picton at Rabobank. Without them, that index has dropped by 0.3 per cent.īut it is the glassy-eyed belief that these US stocks’ ascent represent some kind of new revolutionary productivity paradigm, led by artificial intelligence and spilling its bounty across corporate America, that is really stirring memories of the dotcom boom and bust. ![]() The concentration is, in itself, enough reason to give many investors pause, although Deutsche Bank also calculates that if anything, performance concentration is even more extreme in Europe, where just three stocks - ASML, Novo Nordisk and SAP - account for more than all the gains in the Stoxx 600 this year. Between them, they account for about half of the gains in the entire S&P 500 so far this year, according to calculations by Deutsche Bank, and together with Apple, Alphabet, Amazon and the stumbling Tesla, they account for more than a quarter of the index’s entire market capitalisation. And you would need to have been living under a rock for the past year or so to fail to understand why these three stocks are so crucial to the wider market. ![]() One does not need a tinfoil hat or a particular fondness for hyperbolic finance bro YouTubers to spot echoes of that period of financial market history today, given the blistering rally in tech stocks including Meta, Microsoft and Nvidia. “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” Markets dropped sharply in response to what was clearly, in retrospect, an early skirmish in the ugly market collapse in the following years. “Lower risk premiums imply higher prices of stocks and other earning assets . . . ,” Greenspan said on that fateful day. At the time, the ill-fated dotcom bubble was in full swing, with the share price of dozens of untested, unprofitable tech companies soaring to the moon, often on the flimsiest of rationales. The famous term was apparently dreamt up in the bath by former Federal Reserve chair Alan Greenspan, and unleashed in a televised speech he delivered in 1996. This is not normal, and not a great sign. Not to worry anyone, but the phrase “irrational exuberance” keeps cropping up conversations with investors. Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. ![]()
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