The AI rally still has momentum, but not all tech stocks are equal – here’s which ones could keep soaring and which may slump.
00:00 — AI Rally: Fizzling or Still Has Legs?
00:49 — Shifting Favorites: Nvidia, Microsoft, Google, Amazon
01:38 — AI Bubble Risks & Speculative Companies
02:43 — Potential Fallout if Speculative AI Stocks Burst
04:27 — Safe Bets: Microsoft, Amazon, Google
05:27 — Market Outlook, Less-Loved Sectors & Long-Term Returns
09:18 — Year-End Market Predictions
Transcript:
Caroline Woods
Joining me now, George Seay, Founder and Chairman, Annandale Capital. George, great to have you back. Thanks so much for joining us.
George Seay
My pleasure Caroline. Glad to be here.
Caroline Woods
So, George, the strength of the AI rally has really been called into question this month. It’s trying to make a comeback right now. But are you still a believer? Is it fizzling or is there room to run? George?
George Seay
I don’t know how much room there is to run, but it’s not fizzling. It’s stopping and starting and backing up and moving sideways. It’s all over the place because nobody really knows what to think right now. But nobody really wants to put on a full on bet against the market and the AI trade, because it’s worked so well for so long that people are really reluctant to give it up, and that now you have kind of changing horses in terms of people that stocks that people are most excited about.
George Seay
You’ve gone from Nvidia, Microsoft to Nvidia to Microsoft to Google to Amazon to Google, and now Google, which was kind of the laggard for the first two thirds of this year, is now up 70% for the year and is the new hot AI dot. So I think it does still have legs. I don’t think it’s going to expire until we get a dramatic slowdown in CapEx or recession or flat economic growth or all of the above.
George Seay
But I think you’re you’re in the last few, puffs out of the out of the very short cigar. At this point, I don’t think it’s going to just keep going up forever. Gravity does take effect at some point.
Caroline Woods
Okay. So it has legs, but it sounds like you think it’s very close to the end. Are you concerned at all that AI is a bubble?
George Seay
Well, I think that it’s very clear that some elements of AI companies that are just off the ground, just starting up with no revenues, no earnings, no nothing are clearly in a bubble. I mean, you look at the data center company that went public and in the panhandle of Texas this year, IPO did at a market valuation of close to $20 billion.
George Seay
And they’re not going to have any revenues or earnings for many, many years, if ever, that clearly that segment is speculative at best. Google, Microsoft, Nvidia, these are not speculative companies. These are the greatest companies the world is really ever seen. And so the question then is a relative one of what do you pay for this earnings growth and what’s it going to be.
George Seay
And that’s where the the the simple analysis becomes very complex, because that’s a really hard question to ask when you get into relative valuation and what you should pay for things.
Caroline Woods
Okay. So even if pieces of AI are actually in a bubble, if and when it bursts, what would the fallout look like?
George Seay
I think you’d see in companies that may never arrive, there’s a lot of, enthusiasm. There’s a lot of energy, a lot of speculation right now, and they’re all performing at very high levels. It’s very reminiscent of the internet bubble 20, 25 years ago as horribly. That’s 25 years ago, where a lot of these companies are going to go away or fade away or never, never arrive.
George Seay
But the mainstream companies that have very real profits, very real revenues and very real growth, they’re just going to try to find their best spot from a valuation perspective. And that’s going to be a process, not a bid. And when the growth rate of all this slows down somewhat, you’re going to find people that they won’t pay 4550 times earnings for these companies.
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