Market after NVDA
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@horace the short term noise and the upside (of AI) I agree seems to be there. A rising internet tide will raise all stock ships, or something like that. I think from a zoomed out view that the market is a bit frothy and may continue to be that way so as long as Trump has his thumb on the fed scale but eventually (who knows when... in 3-5 years maybe) there will be a need to release a lot of steam out of the market. I won't try and time it, but I think I may convert to much less risky portfolio options the higher the froth seems to go.
Separately, that discussion about affordability of having a family and the fact that boomers own so much of the real estate and stock market wealth, and that their natural conversion of 401ks back into cash may eventually put some downward pressure on the market... not sure how strong or valid any of that is, but I suppose it may help mute the froth.
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Here’s a concise summary:
Howard Marks (Co-Chairman of Oaktree Capital Management) issued a follow-up memo on AI, noting how rapidly the technology has advanced even in a few months. He observes that AI is increasingly moving toward autonomous systems where humans set objectives and guardrails, and the AI executes, reviews, and delivers finished work independently.
Marks believes AI is real, powerful, and likely capable of replacing substantial knowledge work. He suggests its long-term potential is more likely underestimated than overestimated. However, he cautions that this does not automatically mean AI-related investments are cheap or fairly priced.
He points out that soaring demand for AI capacity is already driving major revenue growth and validating the large capital expenditures by hyperscalers such as Microsoft, Alphabet, and Amazon. While these companies could turn out to be either overvalued or undervalued, Marks doubts they will ultimately be remembered as dramatically overpriced given their profitability.
His conclusion: since no one can definitively say whether this is a bubble, investors should avoid going “all-in” (risking ruin) or “all-out” (risking missing a major technological shift). Instead, he recommends a moderate, selective, and prudent allocation to AI.
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If I were smart, and maybe I'll ask my TARS, is it would be better to invest in companies that are prime to gain from AI productivity, instead of which companies will be actually building the AI infrastructure, which seems far riskier given the vast sums of cash being thrown into it.
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TARS, after some compliments about this approach basically said:
- Cybersecurity/IT: Crowdstrike and Palo Alto Networks
- Enterprise/Workforce Management: ServiceNow and Workday
- Smart building/HVAC: Johnson Controlls, Carrier Global, Lennox International
- Financial Services/Insurance: JP Morgan Chase and Progressive
