Tech megacaps lose $770B in value as Nasdaq suffers steepest drop since April
cnbc.com
cnbc.com
Written some time ago by the CFO of a company that was making more money than ever in a rapidly growing new industry that was completely changing the landscape of the entire world. (Not investment advice - it could be different this time.)
> How are *they* overvalued?
By the way, you forgot to mention that TESLA's forward P/E ratio is approximately 203.39, indicating the price investors are willing to pay for each dollar of estimated future earnings. This ratio is lower than its trailing P/E of around ~259.
Analysts forecast that NVIDIA’s earnings (and EPS) will grow in the ballpark of ~21.9% annually over the coming years.
Enlighten me, what’s Nvidia’s price to sales ratio?
The difference here and between the .com bubble is these companies have high earnings. They are literally walking cash cows and are printing money... AKA the earnings, with revenue not being important here because that's what CAUSED the .com crash. (High revenues, but absolutely burning money).
NVIDIA is in the business of selling shovels to the gold miners in this scenario, not the gold miners themselves.
One exception i will grant you, is they started giving away some of their tools on equity (investments in openAI, stargate, etc. are very circular), and then will turn around and sell that back to them at their prefered COGS+Profit.
The difference between you and me is that I know that Sun Microsystems was not burning money and had a price to earnings ratio similar to Nvidia now.
What are “these companies” by the way? Do you mean Tesla?
And by "these companies" I mean all the companies i just listed excluding the potential bubbles.
They are all making heaps of cash, buying from a company who is also making heaps of cash on each sale. You also have to price in the geopolitical influence of controling such a important piece of tech.
I agree that it's better that your customers do not go out of business. One should not forget though that they may have other reasons to buy less of the thing you sell or they may prefer to get it from someone else.
Excuse my ignorance, but who are Oracle, Microsoft, Apple, Tesla, Xai, Meta, and Google getting their revenue from?
Apple: their loyal fanbase everywhere.
Google, Meta: advertisers everywhere.
Tesla, Xai: not sure, but definitely not just startups.
Implying these will go under and therefore NVIDIA is in trouble is a stretch. Far more likely they wean off its hw and use inhouse, or OpenAI and Anthropic go under, or AMD catches up, or there is WW3.
2025 – $72.9B 2024 – $29.8B 2023 – $4.4B 2022 – $9.8B 2021 – $4.3B 2020 – $2.8B 2019 – $4.1B 2018 – $3.0B 2017 – $1.7B 2016 – $0.6B
They have always been profitable as a company, and even after all the hype, I would still value them as a "Cash printing machine". Which is what you want when you buy an asset such as a stock.
With the US trying to hyperinflate their debt away, the only safe havens have proven to be cash generating tech businesses and its going to be that way for the forseeable future. Valuations are only going to get crazier from here.
Analyst did also forecast that. (And the company did better than forecast for a while and the stock continued to rise - until it didn’t.)
https://www.forbes.com/1999/03/26/mu4.html
This morning [Merrill Lynch computer hardware analyst and long-term Sun Micro bull Steve Milunovich] increased his price target to $140 a share, or 42 times his fiscal 2000 earnings estimate of $3.30 a share on sales of $13.9 billion. For fiscal 1999, he expects the company to have earnings of $2.79 a share and sales of $11.62 billion. "Sun is increasingly at the heart of Internet computing. Its stubbornness in developing its own technology is paying off," says Milunovich.
I am begging you people to touch some grass. Go and talk to some real people. Not tech peers, actual normal human beings.
https://www.latimes.com/archives/la-xpm-2002-dec-17-fi-enron...
So the headline here should be probably less about a small 5% hiccup in that Bitcoin-like trajectory, and more about why the heck is so much money pouring into the sector - including Tesla and Facebook, which aren't on the forefront of anything right now.
You're all implicitly claiming that all assets return nominal value above inflation, which isn't even remotely true when we teach it to pimple-faced undergraduate students.
But go ahead, downvote me since you and the rest seem to think any asset is better than cash.
Which, of course, once again, isn't true.
You can buy bonds with real coupon rates worse than inflation; you can buy speculative equities whose YoY return nets negative.
But yeah, cash is bad, cash is bad. Buy assets no matter the value!
Go buy Pokémon cards! Right? I mean you guys are so smart, why hold cash? That's basic personal finance!
I bet you also like to tell people "don't time the market, it's time in the market," right?
There's no such thing as the "Lost Decades," that's a spooky Halloween story.
In fact, you're right, go invest in Keurig Dr. Pepper, or no no, how about Kraft Heinz. Those did so well compared to just holding cash.
What about real estate, huh? How about AirBnB? That better enough than cash for you? Not a fan of real estate?
How about Warner Bros Discovery? Yeah? That better than cash?
You could have lost money constantly on GameStop, but wait, there's more, you can go still lose money on it today! Why hold cash?
That's right.
> In fact, you're right, go invest in Keurig Dr. Pepper, or no no, how about Kraft Heinz. Those did so well compared to just holding cash.
You're either trolling me or don't know anything about modern personal finance. If you're willing to get out of your cave and open your worldview a little bit, I recommend reading the Bogleheads wiki.
Your argument is also flawed, as cash still lost some of its value. As it always did.
Also, comparing cash to investment in specific companies stock is an unfair comparison. USD vs S&P500 index is a fairer comparison.
It's fine if you yourself prefer to hold cash for whatever personal reasons you have, but please stop talking nonsense. A comparison of any currency in the world vs a roughly diversified index would invalidate all your points.
No, it wouldn't.
Stop thinking that investment is like in the movies where everyone watches their portfolio value 24/7, please.
Let me take the Investopedia definition[1]: "Market timing is the act of moving investment money in or out of a financial market—or switching funds between asset classes—based on predictive methods. Market timing is the opposite of a buy-and-hold strategy, where investors buy securities and hold them for a long period, regardless of market volatility." (emphasis mine)
Stocks tend to go upwards much more than cash, in the long term, even accounting for crashes. But those crashes are still big. IIRC, if you buy right after a big crash, you get about twice as much stock for the same price, and skip ahead 10 years (25% of the complete duration of the game) compared to someone who bought right before. I haven't run the numbers but I'm assuming that means it's worth holding only cash for 10 years if you're sure there will definitely be a crash some time in that 10 years. That's a best case scenario but 10 years of retirement is not something to be gambled lightly.
also, is Bitcoin a currency?
Oh, because you know for sure that there will be a crash in the next 10 years? A prediction like that alone is worth billions, and I honestly doubt that you're different from the thousands of other who advocated for the same thing since the last 50 years.
In real life, an investor starts to keep assets that aren't as volatile but still aren't cash (e.g. bonds) as he approaches retirement. But even then, if they retire officially (i.e. at 65) then they probably have a national pension to draw from anyway.
> also, is Bitcoin a currency?
I don't care about cryptocurrencies at all, but it is the same classification as gold. People use it to speculate and reassure themselves thinking that "if it goes bad, it will preserve my wealth" and it doesn't have any value except when you trade it with someone for a usable currency.
I never said that. Cash loses money by design. This is not true of any other asset, for obvious reasons.
However, diversified indexes have historically always outperformed cash especially if we compare long intervals.
There is absolutely nothing intrinsic about that happening as a guarantee. Look at other countries' stock exchanges.
There have also been periods of time in US history where your equities would have lost catastrophic value as you were ready to retire and all of a sudden you wouldn't have been able to draw down on your retirement without a blend of income from somewhere else.
You're putting words in my mouth and responding to arguments I have never even made.
> There have also been periods of time in US history where your equities would have lost catastrophic value
This is true, but it also is true for cash. You rarely (never?) need all the value of your portfolio at once, so I don't understand your point. Also, most investors invest throughout their lives so even dramatic losses could actually just be a breakeven due to compounding[1]. My point stands that longer-term, an index vastly outperforms cash.
> you wouldn't have been able to draw down on your retirement without a blend of income from somewhere else
Guess what? This is exactly what happens in most cases (at least in my country) anyway as the national pension doesn't give nowhere near enough to live.
[1]: I've found a simulator that goes back a very long time back (https://dqydj.com/sp-500-periodic-reinvestment-calculator-di...). I've selected a period from January 1884 to December 1932. 1932 is one of the big dips, and 1884 would be the time someone would start working if he retired in 1932 (roughly 45 years earlier). For monthly investment you can put whatever you wish, but I've set the initial investment to zero. You can see that your scare tactic doesn't work as the investor still made a huge profit despite an apocalyptic market crash.
There's actually an imbalance going on - the government has printed way too much money towards the stock market, and way too little towards the basics of a stable society, which is why there are symptoms of too much money and too little money simultaneously.
This is also not like the other bubbles. It feels more like working on nukes or CRISPR but without the barrier to entry and constraints on rate of change. Market loves fast feedback loops. They can actually feel and touch this stuff unlike other game changers.
I love LLMs but I don’t feel it.
https://pluralistic.net/2025/09/27/econopocalypse/#subprime-...
Why would you ask me for investment advice?
The USD is down about 10% this year. Anything USD-denominated needed to go up by 10% just to stay even in real terms.
So you're looking at a 30%-ish baseline for that specific 6 month interval. That's basically where Meta (etc) are. Of the larger outliers:
Nvidia continued growing at >50% YoY, and their largest customers announced increased capex spending plans.
Google's valuation had been depressed by uncertainty from ongoing anti-trust cases. One of them got resolved (and the day the remedies were announced is exactly when Google's share price decoupled from Microsoft, Amazon and Meta).
Tesla? I've got nothing.
In comparison: Waymo has awesome technology, but logistically, they open, like, a small subset of one new city every year. Tesla has the logistics; Waymo doesn't. And there's no third company in the west that's even close.
Its so good that its boring now. I show it to people and they're amazed for the first ten minutes, then they forget about it. "Wait, you weren't driving? That was the car?" It just works. I've literally fallen asleep, accidentally, for a very short time (it has attention monitoring, but its not good). There's an initial moment of panic when I woke up & realized that happened, but then I was like... why? That panic felt like a trauma relic my mind has held on to from driving other cars. In this car, there was zero risk. It was no different than the 500 mile zero-interaction journey I had done the month before. It doesn't need me in the drivers seat.
The only thing it struggles with is when there's debris on the road, or potholes. It'll usually just hit it. But even this is improving; yesterday I noticed a squirrel running across the road, and the car very subtly applied the brakes, before the squirrel cleared the other side, and the car continued at its normal speed. It was exactly what I would have done; maybe the squirrel doubles-back, so you need to prep your speed to be in a place where you can brake. It might have, if the squirrel had decided to do this. I have no doubt they will iron these problems out, because a year ago the list of "situations it struggles with" would have been this entire post.
But if you're not interacting with this technology every day, you have no idea. The future is here, its just not evenly distributed. But, these things have a way of happening slowly, then all at once.
On the other hand, nobody hates Waymo. In fact, people largely love Waymo. When it comes to consumer technology, this is a massive differentiator.
Let me rephrase the earlier with a bit more obvious snark: put "Elon Musk and I believe that.."
The names you pulled out have Size factor in common, and with the modern market cap weighted index/futures dominated market, flows into Size factor have a close correlation with overall liquidity flows. That's a broad phrase, but if you're talking about the narrative over the past 6 months (most human readable market narratives are bunk, but some are sound) you mainly watched the system deleverage and then releverage, which constitutes a major flow of liquidity. With 7% daily real moves, extreme implied volatility, and more concrete geopolitical uncertainty, portfolio risk metrics from any angle light up and risk has to be taken down. Not just hedge funds and traders (although they exert significant influence), but the more broad equity space as well, such as say pension funds who are in portfolios that target a yearly volatility band (vol targeting), or trend followers (500 billion and highly levered), and of course regular people who for either emotional or other reasons can't take the heat.
Since the tariff shock, realized and implied volatility have come down, which mechanically drives a bid from the vol-targeting world, and gives more buying power to any entity who has a volatility budget (and to some degree everyone does), and that forms trends which bring traders and trend followers back in, and of course allows the construction of new narratives which most humans always like to have before committing capital.
The points of extremely high leverage and extremely sharp deleveraging (panic selling) are often excessive in nature. It's a cycle that repeats, in an ongoing auction and price discovery process that never ends. Better to just look at longer term averages if you want to strip those aspects out. But that does beg the question of why this cycle continues to persist, and the answer is quite simply that dynamically targeting exposure can be profitable even with the obvious drawbacks. Selling volatility makes money. Following trends also makes money, and in trend following most of the profit comes from the extreme moves that you would think are the most dangerous (ex: gold recently, or equities themselves - mechanical trend followers have been increasingly net long equities until exposure started coming down within the past few weeks).
The recent selloff had about 150 billion in forced selling from realized and implied volatility exposed entities: "Taking a look at Nomura's estimated "Index Rebalancing Projection” proxy which is an aggregation of SPX Options Dealer positioning / Greeks hedging, Leveraged ETF rebalancing and Vol Control deallocation flows: -$88.9B for Spot ~-2% move (which nearly doubles to -$151.0B in a -3% slide... which is pretty much where the Nasdaq is right now)." (from Friday)
Ex: The portfolio I run has a volatility selling component, and it's been cranking on that for months now with fine results. Typically as this goes on, human fallacies creep in. Look at incentives, which are usually defined in yearly terms, which leads to traders and portfolio managers feeling like they have "house money" to gives back when they have high profits somewhere. Then you also have the greed and fear of missing out that builds up as well. AI being "hot" and the gold narrative are headline stories now.
The flows above can be modeled: https://ibb.co/zW3PNMYw.
Also remember that modern markets are surprisingly illiquid, which effects both on the downside and the upside. Be careful about assigning a few shares trading at a price to the "price" of the entire bulk of shares. This especially applies to the Teslas of the world that you named, and many of the AI names. People like to extrapolate when they maybe shouldn't be.
__________________________________________________________________________
You have some other topics you're bringing up. Some of it can see some pushback: I remember thinking Google was dirt cheap 4 months ago. The popular narrative was that AI was going to destroy Google Search, etc, but I thought it was fairly likely AI search blurbs would not be a catastrophe, and then of course Gemini/Google's in house AI prowess was almost entirely ignored despite fairly excellent execution, and more importantly Google Cloud growth was downplayed at the same time it was hyped up at every other cloud company (that's a spread that seemed unsustainable), and then finally YouTube growth and recent expectation beating aspects of the business were downplayed as well. (This was my biggest equity position if you couldn't tell, although it no longer is since the business seems more in line with peers now).
Then you have some obvious statements that the market is making about currency debasement. Equity markets generally perform very strongly in nominal terms during inflationary periods, and many debasement trades like Gold are through the roof. Perhaps the market is just expecting further concentration of wealth at the top and more asset inflation, rather than goods inflation. Another angle of this is that bonds are not looking attractive to people, and there seems to be some desperation for alternatives (I'd say that explains some of the gold run, especially if you personify foreign central banks this way as well, which is arguably true).
While other mag7 might have inflated valuation, google was undervalued for a long time. There are quite a lot people bet Google would bounce back and the risk was low
A P/E of 25 only makes sense if we expect Google to pentuple its earnings. Already one of the biggest companies on the planet, become five times as big? It seems preposterous.
You want to claim the US stock market for the past 100 years is insane, go ahead, but that's a different argument than saying Google or NVIDIA, only slightly above the average for S&P500, are overpriced compared to the rest of the market.
And if the entire market is overpriced, where you going to invest instead? Crypto? Gold? Both shot up much more. Real estate? Bonds? Europe? China? Better have a good thesis on that.
Often you notice that what seems like a big drop is either pretty common or pretty small.
For instance, looking at the Nasdaq Composite over a few time horizons:
- 6mo: https://www.google.com/finance/beta/quote/.IXIC:INDEXNASDAQ?...
- 5yr: https://www.google.com/finance/beta/quote/.IXIC:INDEXNASDAQ?...
- Max: https://www.google.com/finance/beta/quote/.IXIC:INDEXNASDAQ?...
Fine tuned for what?
Would I sell? No, would I call my family members to make sure they don't need help, or see if they’re concerned about losing their job? Yes,
Correct, you should not be concerned.
Time in market is more important than timing the market.
Remember that when the market falls, you have not lost money, not unless you sell. You may even judge it to be a good buying opportunity since you might assess the new lower price to be more reasonable. Over time, a diversified portfolio will expand in value due to compounding, unless you are not a believer that the future will be better than the past.
Take a look again at the charts - they spell it out clearly.
This is such a bad take, lol. It's a thing meme traders say to cope. You absolutely have lost money. You haven't realized the losses, but you are definitely poorer and should re-evaluate your risk tolerances based on your current worth.
You can take loans out using your stock portfolio as collateral. In attempting to do so, as you speak to a bank, they aren't judging you based on your initial capital investment. They're looking at the current valuation of your portfolio - unrealized gains/losses taken into consideration. That makes your current worth very real and tangible without needing to actually realize the gains/losses.
If taxes didn't occur when you realized gains/losses then people would stop saying this phrase. It's just something said to try and prevent anxiousness from increasing your tax burden. Fundamentally, you lose/gain money whenever the things you own change value.
My point is the if you sell, you realize the loss. If you stay put, it will very likely be recovered AND have grown in time.
Do you disagree?
There's absolutely no guarantees other than that. Yesterday's dip could be the start of the United States' "lost decade." The market could mirror the performance of the Nikkei 225's last 35 years where everyone is underwater for over a generation.
The recent overperformance of the US tech market is an exceptional scenario. People should not be encouraged to believe that if they buy into an exceptional scenario, and continue to blindly hold as their investments go underwater, that it's a sure thing that they will have more money at the time they are forced to exercise for life events. Especially in a time where many investors aren't picking broad, overarching index stocks.
What do you bet?
The solution isn't binary. You don't have to be fully exposed/unexposed to the market all the time.
The other 10% I play around with trying to time the market, taking active bets against specific stocks, etc. to sate the desire to feel in control / gamble and I rebalance the positions every couple of years.
The active positions have overperformed my buy-and-hold strategy for as long as I've been doing it. Our economy seems to be driven more on vibes than fundamentals and reading human emotion is more tractable than predicting the future, but it's also really stressful (and fun!) to do. I feel one of the biggest reasons to earn money is so one can spend less time thinking about money. So, I'm averse to having large, active positions since I start to think about my trades all the time and that feels innately unhealthy.
You've lost money regardless of whether it is realized. You can even find a very simple contradiction in what realization even is: if you bought a stock at 100, double up at 90, and now it's 80 and you sell some, how much have you realized?
Your total net worth is the same regardless of whether you thought you realized a unit of -20 or -10.
> If you stay put, it will very likely be recovered AND have grown in time.
You should think about what risk of ruin is here. If your investments keep going down, what's your move? Double up, because it will likely bounce back? I may not agree that the market is efficient, in fact I make a living out of the inefficiencies, but the degree of inefficiency is close to a rounding error: the current price is a decent estimate of the value, incorporating all known information.
Very happy with the outcome so far from real experience.
I’m just trying to be helpful. I don’t have skin your financial success and I’m not trying to change your mind.
They say long ago somewhere far away an astrologer managed to cause a panic by predicting a devastating volcano. People didn't just flee, they sold their homes for nothing, because they were convinced their homes would be under 3 feet of lava soon.
And that brings us to the key question - is your home worth less, just because everyone on the same streat is selling their houses for pennies? Isn't the opinion of the USGS slightly more important than the opinions of the real estate market?
It's easy to say that the homes were undervalued in that situation with hindsight. If disaster had actually struck then those prices seem fair. Clearly some people sold their houses just before Pompeii and made out like bandits.
Yes, you can apply a rationale mindset to things and use statistics-based inferences to try and calculate what the "real" value of something is rather than what the current, "market-based" value is and, more often than not, that's likely to serve you better, but black swan events still occur plentifully over a human's lifespan and those events are incredibly difficult to factor in when you need to optimize your wealth for practical usability over a couple of decades.
When you’re broadly invested in the market (diversified portfolio), you’re basically saying to yourself that you are optimistic that the future will be better than today. There will be more prosperity, more peace, more human flourishing. If you believe those things, then it is rational to be invested.
If, on the other hand, you believe the future is doomed, then I supposed it could make sense to withdraw all your money in a defensive move and, I dunno, do something else with it.
I know which path I choose.
Here’s one example: if you have a 401k, CD, bond, or investment fund your investment is illiquid for some lockup period. Therefore you don’t have to mark-to-market every day.
As a matter of accounting facts, you are not forced to book the loss in this scenario.
There’s a fun simulation to illustrate this - for those who think they know better, I encourage you to try it: https://personalfinanceclub.com/time-the-market-game/
Like I literally don’t get what the original person was trying to say. Yes, if you’re perpetually holding for the long term nothing really matters.
It is very true that it can be very very difficult for someone to absorb a drop in the market when they need that cash, like the case you mentioned.
I also assume that there are many people who have been bitten by this.
However, I have never seen data to suggest that statistically it is worse to be in the market because most people are likely to be hit by a huge drop that wipes out all their retirement savings and so they become destitute. I’m sure there are cases like that, but it is extreme and I would bet a minority of cases.
Most people follow the advice of gradually shifting your portfolio to debt and away from equities as you age, to reduce this risk.
It's very likely that Tuesday the market will see a buying opportunity and send it right back towards record territory. Which is insane.
I think there is a genuinely new factor at work: so much money flows into the market that it has bought up all of the possible future earnings.
That was all following reasonable advice, but that advice assumed that the market could absorb all of that money. If too much flowed in new capital opportunities would arise. But even before the AI bubble, that had ceased to hold.
Even when the market isn't bad, it's still a good idea to consider your balance between financial and non-financial assets. The whole point of holding financial assets is to eventually maximize your non-financial assets, after all.
Surely there is some time horizon at which we can admit that the market is effectively correct. After 100 years of being “overvalued”, can we call that the real value? 1000 years?
This seems like that meme where the guy is looking in the mirror and telling himself, “you’re not wrong, the market is wrong”[1]
Requires an alternate proposal about how to value stocks, and in aggregate, the stock market at large.
The only reasonable way to value stocks is in their potential, upon purchase, for the purchase price to be returned via dividends issued on future profits (even stock buybacks ultimately justify their price increase on dividends being divided among fewer shareholders).
> After 100 years of being “overvalued”, can we call that the real value? 1000 years?
Stocks are being priced at levels that will require longer than a full human lifetime to return their share price via dividends. "Overvalue" is subjective; some people will be fine with the idea that only their children (or, someday, only their grandchildren, and so on ad infinitum) will see a profit. People will also pay a premium for the liquidity of the stock market compared to less-liquid investments (e.g. real estate).
There is simply too much cash sloshing around compared to the opportunities for return available.
A parallel to draw very easily is an investment in commodities. Those will never pay a dividend, so therefore they're worthless? Obviously not, you invest in them because you expect their value to rise. Same with a stock.
An asset is worth what someone is willing to pay for it. That is its value. Intrinsic value is an element, but not the most important one.
Everyone loves the "you can't beat the S&P" trope, but that's also just ignorance. There's a reason that proprietary trading firms generate more profit per employee than any other business in the world.
> There's no gambling involved - investing is not dumb chance
First a gambling does not have to be a theoretically pure dumb chance in order to be gambling. Second, in practice it basically the same thing as betting on horses used to be.
There is a reason why small investors loose money on their investments on average despite markets going up. Because what they do is not investing.
> There are real companies behind these purchases with real expectations of future growth and thus increase in value.
Oh common, this relationship is quite broken for exactly the most known companies.
Source?
This seems like a willful misinterpretation.
They say “you won’t beat the S&P” because maybe some HFT firm with highly secretive and advanced technology and MIT PhD quants might… but you, Mr. Retail McDumbMoney, don’t stand a chance.
If the person who holds the share can never expect to be paid for holding the share, then you're describing a Ponzi scheme. Eventually you cannot find another sucker willing to pay in even more.
> commodities
Are used as manufacturing inputs and thus a commodity investment injects liquidity in exchange for a return, should manufacturing demand (for those inputs) rise. Their intrinsic value derives from their consummability.
Stocks/corporations do not have intrinsic value beyond the sum of the fair market prices of the assets belonging to the corporation, should they be liquidated and dispersed among shareholders... which would be a dividend. At the end of the day the only reasonable means to price a stock is a calculation of expected dividends.
Earnings do not justify the price, for the market as whole. There is only so much earnings to be had. It is overvalued by the metric of dividends or property (retainer earnings).
> Earnings do not justify the price
… maybe? I’m not sure I believe you conclusively, so you would have to prove this before I accept it.
PE ratios are higher than historical averages (according to Perplexity, S&P PE is 27, which is higher than the median of 18. The top 10 holdings hover between 12 and 80, excluding TSLA which is over 200).
However, I could see reasonable rationalizations for these PEs that could tell me that they’re expensive compared to historical trends, but not “overvalued.”
Maybe investors are assuming technological change will drive accelerating earnings growth (especially true for the top tech stocks) more than we’ve experienced historically. Top tech stocks are more efficient cash generating machines than they’ve ever been before, and the S&P has shifted to high multiple sectors like tech and away from lower multiple sectors like energy and financial services. So it’s possible our understanding of “expensive” stocks is miscalibrated if we just look at historical PE ratios.
I can’t say for sure that equities are priced “reasonably,” but I can say you haven’t convinced me they’re overvalued.
And the S&P.has been going up much faster than 4%. If there was ever a point where it was properly valued it must be overvalued now.
The S&P index isn't the whole story, especially in an expanding tech economy. But still, I'm looking at it as an absolute, rather than a relative number, and it strongly suggests that earnings cannot justify these pricings, even when we're not at the top of a bubble.
The only “yes, but…” I would add is that it seems to my retail, unsophisticated eye that:
1) while you could do better nominally in bonds, it seems like investors are pricing in a lot of earnings growth, not just static earnings in PE.
2) the market expects inflation, and blue chips can typically raise prices during inflation which protects shareholders, whereas bonds don’t offer this protection, other than TIPS etc
3) it also seems like (for now…) US equities are still a safe haven for international capital, so demand is still there (i.e. there is no alternative)
M2 money supply going up. Dollar going down.
My prediction is we'll be at all time highs again a month from now.
We've truly arrived at a strange time in history where a 1% drop is a considered a "dip".
> My prediction is we'll be at all time highs again a month from now.
If a global pandemic and a global trade war can't stop the market, seems like nothing will. The market will be bid up until whoever is in charge decides times up.
What will stop the market is the sudden realization (among retirees and near-retirees) that all of this AI bubble talk is relevant to their interests because their equity index exposure is actually 1/3 mag7 exposure.
They will, correctly, decide it is time to reduce equity exposure (possibly to zero, depending on age and situation).
This is, potentially, a recipe for a very abrupt and disorderly rush for the exit.
Last week, Department of Commerce BIS rolled out a new rule significantly expanding how and to whom export controls against China are applied, especially around semiconductors and other "dual-use" goods. China viewed this as a violation of the Madrid "trade ceasefire" and so this Thursday they turned around and unloaded the cannons of rare earth and other export controls, which if enacted would plausibly hobble the global economy and its AI capex sugar high.
For whatever reason no one took this all too seriously until Friday when Trump flipped out on his truth social post, but the broader context is if anything more concerning because these escalations having been going on under the surface and now both sides are conveying they believe they have escalation dominance.
https://www.dowjones.com/business-intelligence/blog/bis-50-r...
https://www.skadden.com/insights/publications/2025/09/new-bi...
I think Trump may actually want a deal with China but his admin is filled with China hawks and you obviously cannot have them running around doing their thing if you want a deal.
What sort of software would be impacted by this? Almost anything could be critical depending on the context.
Obviously plenty of Chinese alternatives exist at this point.
Tech industry keeps this economy going. Everyone should thank all those AI investments
The bubble is more isolated than in 2000. If "AI" crashes, tech companies might focus on real progress again.
At the beginning of 2019 the Nasdaq was at 6000 and the economy was even better, with ample jobs in the tech sector.
$0.77 trillion here, $0.77 trillion there, and pretty soon we'll be talking about real money.
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[a] https://en.wikiquote.org/wiki/Everett_Dirksen#Misattributed
This won't be the start of (further) major decoupling unless it's what China wanted in the first place, and they needed another 6 months of preparation before committing to the path. If China says "Go ahead and tariff us 100%. All rare earth exports and re-experts to the US are banned", then that's when to expect changes that won't be reversed any time soon. Everyone knows that Trump will blindly auto-escalate in response, so China saying so would mean "this is the outcome we prefer" and all that follows from there.
Trump is about to bail out a handful of US industries because of it. Specifically agriculture has taken tens of billions of dollars in losses because China entirely stopped importing US soy and other crops in the last year.
Trump's whole shtick is that the world NEEDS the US no matter what. He's absolutely wrong.
China has heavily invested in countries to avoid this exact situation.
And this is before the 100% tariffs.
Raking in hundreds of millions in profit. Clearly done by someone with insider knowledge and the intent to cover their tracks.
Or people could see a buying opportunity on Monday and erase this all at once. And nobody can say which it will be.
Stock market either react or dont based on how they feel. It has little to do with actual economical impact on companies, it does not seem to care about fundamentals either. It was fine for years with overpriced companies and itches to create yet another bubble.
I get that everybody is hurt in the long term. But until actual investor billionaires class is actually really hurt financially, the rollecoaster will go round and round.
I have come to terms with world becoming worst and likely not getting better in my lifetime again. I know there is no way back, this has already been settled. There is no suspension on where it will all go.