I keep getting the same question over and over again…
How close are we to the top?
Seeing as both major indexes and the largest company in the world (Nvidia) hit all time highs recently… it’s fair to be asking
On one hand, you’ve got a monster 3.5 year run since the bottoms of November 2022.
Nvidia has led the headlines but large caps like Micron, AMD and Meta are all up more than 300%.
Then you’ve got stocks like Sandisk up 3,000%.
It’s been an AI-arms race… which has led to comparisons with the dotcom bubble.
But I’m not so sure we’re in late 1999 territory just yet.
If you look at valuations for the megacaps right now.
Google - 30x PE
Apple - 31x PE
Nvidia - 40x PE
Amazon - 31x PE
Microsoft - 24x PE
Meta - 22x PE
Nothing obscene in there.
Whereas in late 1999 the Nasdaq was led by Microsoft at a PE of 71, Cisco at a PE of 472… and Yahoo which had barely turned a profit at the time.
In fact the average PE of the Nasdaq in 1999 was 90. Today it’s 35.
Not bargain basement territory… but nowhere near peak internet stock mania.
And for me the big difference is that these CAPEX investments are clearly paying off… at least for the big tech companies.
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The biggest problem for you as an investor is not FOMO’ing all these popup AI names that are coming out every day.
Whether it’s the obscure Japanese optics company… or the latest rare Earth mine in Kazahstan… there’s always a compelling reason to buy.
And yet more people get burned by these “next Nvidia” type invesments than they do just buying what’s already working.
Plus, we still have potentially $3-4 trillion worth of IPOs from OpenAI, Anthropic and SpaceX to come.
So there are a lot better places for your money than the new-AI-company-du-jour.
Because sometimes the best investment is the one you already own…
Oliver