@jon-nyc said:
@Horace said:
@jon-nyc said:
I’ve read some interesting perspectives on why it isn’t in a bubble, both looking at PE ratios (much lower than in the dot com era) and the fact that the infrastructure companies aren’t building ahead of demand (like Cisco and the telecoms did in the dot com era). No one is laying the equivalent of dark fiber. Every gpu nvidia makes gets lit up right away.
Gavin Baker’s fund is interesting- he owns all these AI stocks but has a huge short position in QQQ as a hedge.
Complicated hedging strategies don't make much sense to me. If you want to be both long and short highly correlated equities in order to insure the primary bet, maybe just discard the insurance and invest a reduced amount of capital in the primary bet. But if you want to potentially profit on a massive reverse move, I guess you'd have to do something more complicated.
The short gives you a lot more money to invest. You’re betting that the AI companies will compose a larger and larger percentage of the tech stock universe, which could pay off regardless of what happens to the overall market. It’s actually how hedge funds got their name.
I had ChatGPT explain it to me. The reason I was confused is that it's not really an insured long on the AI stocks. It's a pairs trade where the investor is betting the AI stocks will outperform the broader QQQ, regardless of the overall direction of either. I guess that's a "hedge" by some other definition than the one I'm familiar with. I know it as a pairs trade, or arbitrage.
