How curious: while social networks and the media burn with predictions about the imminent explosion of the AI bubble, It turns out that, among the big technology companies, There are some that go up and others that go down.
If there is a sector bubble,They shouldn’t all move more or less in the same direction, How did it happen at the end of 1999 and beginning of 2000?
In reality, the reason why we talk about bubbles is not so much because they exist or not, but because it is the best way to attract readers or generate followers.
The reason we talk about bubbles is not so much because there are or aren’t any, but because it is the best way to attract readers.
And there has to be a story behind it, which on this occasion is that The Magnificent Seven of Wall Street They are investing too much in the development of AI and that is going to sink their income statements.
But lo and behold, Alphabet (Google) is doing the same thing as Nvidia or Meta, but it turns out that Alphabet rises like a rocket, while the previous two go down somewhat or even go down a lot. And it’s not a unique case of disparity between The Magnificent Seven.
To understand the story we have another very striking example: that of that famous international news agency, which one day tells you about the bubble of the sector as a whole and the next explains that Google is at its highest. as a consequence of their investments in AI!
The response to what is happening is, as is often the case, more boring than the story. At the moment, rather than facing a bubble about to burst, we are facing a clear case of competition in the technology sector which, yes, will have effects both on certain values and on the sector index itself.
More than a bubble about to burst, we are facing a clear case of competition in the technology sector
And the latter is important, since The Nasdaq has typically been the most profitable index over the last 20 years. And this could change if it starts carrying ballast.
Go ahead we think yes, it will create a bubbleas always happens with great technological revolutions. But in the markets you have to refine, it is not enough to say that there will be one, you have to have a some idea of when that situation may arrive and, in our opinion, it is early to talk about it being about to explode.
I will not insist on this, because it is not today’s topic and they have a video on my YouTube channel that talks precisely and in detail about this. Right now what we see is simply a question of competition and positioning.
If Nvidia goes down and Alphabet goes up, it is as a consequence of the latter’s efforts to achieve independence in semiconductors and for making them faster and better, as well as for their advances in quantum computing. And that things like this threaten Nvidia’s quasi-monopoly.
Yes, a bubble will be created, as always happens with great technological revolutions
Something similar occurs between how the market negatively values the way in which Meta considers its position in AI, compared to that of, for example, Amazon.
This leads us to the fact that perhaps in the technological world we have to start choosing more carefullywhich may not be as easy as buying the Nasdaq or The magnificent seven and that’s it. That it is very possible that we will have to start focusing on specific values, sectors or subsectors that they can do better than the index, if we want technology to help us surpass the profitability of general indices.
In this sense, they are of special interest listed investment funds, which are investment funds the same as traditional investment funds, but with many advantages over them.
So many that, to prevent them from eating up the market, in Spain they have been denied the tax advantage that has traditional funds. And, in addition to being much more agile in operations and much cheaper, they allow investing in technology subsectors where there is little competition and a lot of novelty.
Subsectors that can be very broad, since the technological revolution in which we find ourselves is not only ascribed to artificial intelligence. In fact, it touches sectors as diverse as the energy -since an enormous amount of it is going to be needed- or new payment methods that are going to grow thanks to the implementation of AI in the financial sector.
***Víctor Alvargonzález is a founding partner of the independent financial advisory company Nextep Finance.
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