AI is going to transform things but these current prices are crazy.
During bubbles valuations are driven by growth at any cost.
During crashes businesses are kept alive by their ability to function profitably.
So if trying to separate winners from losers, then central question is "Do I believe this company has an ability to pivot from growth to profitability without torpedoing itself?"
Which ultimately gets to unit economics and cost vs profit scaling trends.
It's an honest question. In the real world, resources and people are finite. Things have to make sense, the bills have to be paid.
In the stock market however, a company can be completely worthless in the real life, but if the money blobs all agree to pumo money into it the stock price goes up anyway.
Curious question... do the ultra wealthy ever get margin called on personal loans secured by unsold equity?
I'd assume the folks we're talking about doing that have sufficiently small loan to value (a year's expenses vs all their stock) to avoid, even in a downturn.
Maybe at the more upper income segment where LTVs on smaller equity totals are higher?
Whether that "justifies" the market prices is orthogonal, all the market price says is that people want to own a piece of the pie at the current price being offered. It can stay that high as long as there continue to be people interested in owning shares of the companies.
I'd make the note that you've converted raw materials and labor (and maybe some capital machinery/tools) into a finished good.
Whether the market will value that finished good at more than the sum of what you paid for its parts is a fair question though!
It's entirely possible to have net-unprofitable economic activities, especially in a bubble.
There's real wealth and there is all of the manipulation to drive up prices.
That money sought returns and found them in hypergrowth of increasingly dumber nonsense. First it was Meta (or back then, just Facebook), then Tesla, then during Covid cryptocurrencies and NFTs, and now it's AI... but now, there seems nothing to be the "next big thing" to sink money into when the old thing dies down in growth and expectation and matures. Maybe gambling, but that's not sustainable, the number of whales/marks to make money from is finite.
IMHO, we're headed for a very big worldwide correction to deflate the markets and hand back a lot of the money to the central banks where it can be taken out of circulation, and it will be an event larger than the dotcom bust plus 2007ff combined. But, unfortunately, the markets can stay irrational longer than a good short-seller can stay solvent...
A 1-device to rule them all could be very empowering. Sodium batteries will be big. True wireless power would be huge for solar energy generation from space and sent to Earth. Any power breakthroughs are very noteworthy as the effects cascade.
Lots of 'next big things' (and people) likely 'shelved' on purpose as too disruptive. Welcome to Earth. It's not so much 'what' will be big, but 'who.' Headshots and lineage still matter. Heart and soul is really the only big thing.
A bulls### detector (and repellent in an aerosol) would also be a timeless classic. As would a latent human superpower training and attunement school - until it gets shutdown.
In 2022 we still had ZIRP, so a P/E of 34 was relatively low. (Interest rates are E/P for cash).