Ategrity Specialty Insurance Company Holdings Reports Second Quarter 2025 Results
Second Quarter 2025 Highlights
Gross written premiums increased 32.3% to $167.5 million
Net income attributable to stockholders was $17.6 million, or $0.39 per diluted share
Adjusted net income attributable to stockholders (1) was $17.9 million, or $0.41 per diluted share
Combined ratio was 88.9%, compared to 94.0% in Q2 2024
Adjusted return on stockholders' equity (1) was 14.5%
Book value per share at quarter-end was $11.64 per share, up 12.2% from year-end
Initial public offering was completed in June 2025, raising $130.3 million in gross proceeds through the issuance of 7,666,667 shares
'This was a strong quarter for Ategrity,' said Justin Cohen, Chief Executive Officer. 'We executed with focus and discipline, expanding distribution relationships, delivering solid underwriting results, and driving operational efficiencies. Our productionized underwriting model, which combines technical underwriting with technology-enabled processes, is gaining traction in the marketplace, delivering value to our partners, and driving profitability for our shareholders. Looking ahead, we believe our investments in automation and analytics will accelerate our opportunity to redefine how E&S insurance for small and medium-sized businesses is underwritten and delivered.'
Underwriting Results
For the quarter ended June 30, 2025, gross written premiums increased 32.3% compared to the prior-year period, driven by expansion of our distribution network and increased wallet share with existing partners. Gross written premiums for casualty lines increased 56.7% year-over-year, reflecting the Company's strategic focus on expanding casualty-related products and verticals. Gross written premiums in property lines increased 3.7% year-over-year, reflecting the impact of pricing actions and targeted reductions in catastrophe exposure initiated in 2024.
Underwriting income (1) was $9.6 million for the quarter, up 119.1% from $4.4 million in the prior year period. The combined ratio for the quarter was 88.9%, a decrease from 94.0% in the prior-year period, driven by improvements in both the loss and expense ratios. The loss ratio decreased by 2.8 percentage points to 58.0%, supported by strong underwriting results in property, including lower attritional losses and favorable catastrophe experience.
The overall expense ratio was 31.0% for the quarter, compared to 33.2% in the prior-year period. The largest driver of this improvement was policy acquisition costs as a percentage of net earned premiums, which decreased by 2.6 percentage points to 18.5%, reflecting higher ceded earned commissions and a more favorable business mix. Operating expenses, net of fee income, were 12.4% of net earned premiums for the quarter, reflecting increased fee income and emerging operating scale. Operating expenses were higher year-over-year due to investments made in 2024 in personnel, systems, and infrastructure in anticipation of growth opportunities and the Company's transition to becoming a public company.
'This quarter's underwriting results reflect the deliberate actions we have taken to grow and shape our business,' said Chris Schenk, President and Chief Underwriting Officer. 'We saw a meaningful increase in submissions, but we deployed capital with discipline. We achieved above-technical rates in casualty, held firm on property rates even as parts of the market began to soften, and concentrated on targeted micro-segments where we have deep expertise. By leveraging our productionized underwriting model—combining segmentation, analytics-driven pricing, and automation—we were able to deliver strong, profitable growth.'
_______________
1
See the definitions and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures in the section titled 'Non-GAAP Financial Measures' below.
Summary of Operating Results
The following table summarizes the Company's results of operations for the three and six months ended June 30, 2025 and 2024:
Three Months Ended June 30,
Six Months Ended June 30,
($ in thousands)
2025
2024
2025
2024
Gross written premiums
$
167,502
$
126,614
$
283,645
$
208,219
Ceded written premiums
(50,231
)
(41,838
)
(76,503
)
(61,187
)
Net written premiums
117,271
84,776
207,142
147,032
Net premiums earned
86,928
72,638
165,229
140,917
Fee income
1,524
191
2,084
316
Losses and loss adjustment expenses
50,412
44,128
97,274
85,174
Underwriting, acquisition and insurance expenses
28,430
24,315
53,315
47,705
Underwriting income (1)
9,610
4,386
16,724
8,354
Net investment income
11,891
5,728
19,786
10,981
Net realized and unrealized gains (losses) on investments
1,409
(4,215
)
(3,190
)
(1,828
)
Interest expense
(447
)
(544
)
(894
)
(1,094
)
Other income
28
24
993
48
Other expenses
(161
)
(56
)
(399
)
(110
)
Income before income taxes
22,330
5,323
33,020
16,351
Income tax expense
4,713
1,207
6,953
3,277
Net income
$
17,617
$
4,116
$
26,067
$
13,074
Less: Net (loss) income attributable to non-controlling interest - General Partner
(5
)
(828
)
(16
)
374
Net income attributable to stockholders
$
17,622
$
4,944
$
26,083
$
12,700
Key Metrics
Adjusted net income attributable to stockholders (1)
$
17,857
$
4,944
$
26,400
$
12,700
Loss ratio
58.0
%
60.8
%
58.9
%
60.4
%
Expense ratio
31.0
%
33.2
%
31.0
%
33.6
%
Combined ratio (3)
88.9
%
94.0
%
89.9
%
94.1
%
Return on stockholders' equity (2)
14.3
%
5.9
%
10.9
%
7.7
%
Adjusted return on stockholders' equity (1)(2)
14.5
%
5.9
%
11.0
%
7.7
%
Diluted earnings per share
$
0.39
$
0.14
$
0.60
$
0.35
Adjusted diluted earnings per share (1)
$
0.41
$
0.14
$
0.62
$
0.35
(1)
Each of these metrics is a non-GAAP financial measure. See '—Reconciliation of non-GAAP financial measures' for a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure.
(2)
For the three and six months ended June 30, 2025 and 2024, net income attributable to stockholders and adjusted net income attributable to stockholders are annualized to arrive at return on stockholders' equity and adjusted return on stockholders' equity.
(3)
Ratios are calculated using unrounded figures. The sum of components may differ slightly from totals shown due to rounding.
Gross Written Premiums
The following table presents gross written premiums by product for the three and six months ended June 30, 2025 and 2024:
Three Months Ended June 30,
Six Months Ended June 30,
($ in thousands, except percentages)
2025
2024
%
Change
2025
2024
%
Change
Casualty
$
107,023
$
68,300
56.7%
$
189,163
$
118,806
59.2%
Property
60,479
58,314
3.7%
94,482
89,413
5.7%
Gross written premiums
$
167,502
$
126,614
32.3%
$
283,645
$
208,219
36.2%
Expense Ratio
The following tables summarize the components of our expense ratio for the three and six months ended June 30, 2025 and 2024:
Three Months Ended June 30,
($ in thousands, except percentages)
2025
2024
Expenses
% of Net
Earned
Premiums
Expenses
% of Net
Earned
Premiums
Policy acquisition costs
$
16,088
18.5%
$
15,329
21.1%
Operating expenses, net of fee income (1)
10,818
12.4%
8,795
12.1%
Underwriting, acquisition and insurance expenses, net of fee income (2)
$
26,906
31.0%
$
24,124
33.2%
(1)
Net of fee income of $1.5 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively.
(2)
Ratios are calculated using unrounded figures. The sum of components may differ slightly from totals shown due to rounding.
Six Months Ended June 30,
2025
2024
($ in thousands, except percentages)
Expenses
% of Net
Earned
Premiums
Expenses
% of Net
Earned
Premiums
Policy acquisition costs
$
30,820
18.7%
$
30,232
21.5%
Operating expenses, net of fee income (1)
20,411
12.4%
17,157
12.2%
Underwriting, acquisition and insurance expenses, net of fee income
$
51,231
31.0%
$
47,389
33.6%
Investment results
The following tables summarize net investment income and net realized and unrealized gains on investments for the three and six months ended June 30, 2025 and 2024:
Three Months Ended June 30,
Six Months Ended June 30,
($ in thousands)
2025
2024
2025
2024
Investment income
Fixed-maturity securities
$
6,460
$
2,634
$
12,725
$
3,521
Short-term investments
1,154
767
1,724
2,281
Cash equivalents
475
1,612
911
3,604
Equity securities
—
22
—
44
Loans to affiliates
1,543
250
1,793
501
Securities sold not yet purchased
—
(103
)
—
(235
)
Total fixed income
9,632
5,182
17,153
9,716
Utility & Infrastructure Investments
2,422
658
2,931
1,384
Other expenses
(163
)
(112
)
(298
)
(119
)
Net investment income
$
11,891
$
5,728
$
19,786
$
10,981
Net realized and unrealized gains (losses) on investments
$
1,409
$
(4,215
)
$
(3,190
)
$
(1,828
)
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, we believe that certain non-GAAP financial measures provide investors in our common stock with additional useful information in evaluating our performance. Management believes that excluding certain items that are not indicative of core performance assists in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods. These non-GAAP financial measures may be different than similarly titled measures used by other companies.
These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are limitations related to the use of these non-GAAP financial measures as compared to the most directly comparable GAAP financial measures.
Underwriting Income
We define underwriting income as income before income taxes excluding the impact of net investment income, net realized and unrealized gains (losses) on investments, other income, interest expense, and other expenses (which include expenses related to corporate activities and expenses recorded by us in connection with the Company's initial public offering). Underwriting income is a measure of the pre-tax profitability of our underwriting operations and allows us to evaluate our underwriting performance without regard to net investment income among other things. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting income should not be viewed as a substitute for income before income taxes calculated in accordance with GAAP and other companies may define underwriting income differently.
Underwriting income for the three and six months ended June 30, 2025 and 2024 reconciles to income before income taxes as follows:
Three Months Ended June 30,
Six Months Ended June 30,
($ in thousands)
2025
2024
2025
2024
Income before income taxes
$
22,330
$
5,323
$
33,020
$
16,351
Less:
Net investment income
(11,891
)
(5,728
)
(19,786
)
(10,981
)
Net realized and unrealized (gains) losses on investments
(1,409
)
4,215
3,190
1,828
Other income
(28
)
(24
)
(993
)
(48
)
Add:
Interest expense
447
544
894
1,094
Other expenses
161
56
399
110
Underwriting income
$
9,610
$
4,386
$
16,724
$
8,354
Adjusted net income attributable to stockholders (previously referred to as adjusted net income attributable to members)
We define adjusted net income attributable to stockholders as net income attributable to stockholders excluding certain other non-operating expenses, which include expenses recorded by us in connection with the Company's initial public offering. We use adjusted net income attributable to stockholders as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted net income attributable to stockholders should not be viewed as a substitute for net income attributable to stockholders calculated in accordance with GAAP, and other companies may define adjusted net income differently.
Adjusted net income attributable to stockholders for the three and six months ended June 30, 2025 and 2024 reconciles to net income attributable to stockholders as follows:
Three Months Ended June 30,
Six Months Ended June 30,
($ in thousands)
2025
2024
2025
2024
Net income attributable to stockholders
$
17,622
$
4,944
$
26,083
$
12,700
Adjustments:
Other non-operating expenses (1)
298
—
401
—
Tax impact
(63
)
—
(84
)
—
Adjusted net income attributable to stockholders
$
17,857
$
4,944
$
26,400
$
12,700
(1)
In the three and six months ended June 30, 2025, other non-operating expenses includes share-based compensation expenses recorded by us related to our initial public offering.
Adjusted return on stockholders' equity (previously referred to as adjusted return on members' equity)
We define adjusted return on stockholders' equity as adjusted net income attributable to stockholders, expressed as a percentage of average beginning and ending stockholders' equity during the period. Adjusted net income attributable to stockholders excludes the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We use adjusted return on stockholders' equity as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted return on stockholders' equity should not be viewed as a substitute for return on stockholders' equity calculated in accordance with GAAP, and other companies may define adjusted return on stockholders' equity and adjusted net income attributable to stockholders differently.
Adjusted return on stockholders' equity for the three and six months ended June 30, 2025 and 2024 reconciles to return on stockholders' equity as follows:
Three Months Ended June 30,
Six Months Ended June 30,
($ in thousands, except percentages)
2025
2024
2025
2024
Numerator: Adjusted net income attributable to stockholders, annualized (1)
$
71,428
$
19,776
$
52,800
$
25,400
Denominator: Average stockholders' equity
493,253
334,977
478,998
329,803
Adjusted return on stockholders' equity
14.5
%
5.9
%
11.0
%
7.7
%
(1)
For the three and six months ended June 30, 2025 and 2024, net income and adjusted net income are annualized to arrive at return on stockholders' equity and adjusted return on stockholders' equity.
Adjusted diluted earnings per share
We define adjusted diluted earnings per share as adjusted net income available to stockholders, divided by weighted average common shares outstanding - diluted for the period. We use adjusted diluted earnings per share as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted diluted earnings per share should not be viewed as a substitute for diluted earnings per share calculated in accordance with GAAP, and other companies may define adjusted diluted earnings per share differently.
Adjusted diluted earnings per share for the three and six months ended June 30, 2025 and 2024 reconciles to diluted earnings per share as follows:
Three Months Ended June 30,
Six Months Ended June 30,
($ in thousands, except share and per share data)
2025
2024
2025
2024
Numerator: Adjusted net income attributable to stockholders
$
17,857
$
4,944
$
26,400
$
12,700
Denominator: Weighted-average shares outstanding - diluted
43,584,999
36,243,959
42,246,997
36,235,950
Adjusted diluted earnings per share
$
0.41
$
0.14
$
0.62
$
0.35
Conference Call
Ategrity will hold a conference call to discuss this press release today, August 11, at 5:00 p.m. Eastern Time. Interested parties may access the conference call via a live webcast, which can be accessed at https://events.q4inc.com/attendee/426743085 or by visiting the Company's Investor Relations website. Please join the webcast at least 10 minutes before the scheduled start time. A replay of the event webcast will be available on the Company's Investor Relations website approximately two hours following the call, for a period of at least 30 days.
About Ategrity Specialty Insurance Company Holdings
Ategrity Specialty Insurance Company Holdings is a profitable and growing specialty insurance company dedicated to providing excess and surplus ('E&S') products to small to medium-sized businesses across the United States. We have built a proprietary underwriting platform that combines sophisticated data analytics with automated and streamlined processes to efficiently serve our clients and deliver long-term value to our stockholders. The small to medium-sized business market is characterized by large volumes of small-sized policies, and we believe our competitive edge lies in our ability to offer consistent, high-speed, and low-touch interactions that our distribution partners value. This advantage stems from our technology-driven method of standardizing, simplifying, and automating our transaction process, which we call productionized underwriting.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. You can identify forward-looking statements in this press release by the use of words such as 'anticipates,' 'estimates,' 'expects,' 'intends,' 'plans,' and 'believes,' and similar expressions or future or conditional verbs such as 'will,' 'should,' 'would,' 'may,' and 'could.' These forward-looking statements include, among others, statements relating to our investments in automation and analytics and their expected impact and expected profitable growth. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks, and changes in circumstances that are difficult to predict.
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this press release as a result of various factors, including, among others: the risks and uncertainties discussed under the caption 'Risk Factors' in our Prospectus filed pursuant to Rule 424(b)(4) filed with the Securities and Exchange Commission, (the 'SEC') on June 11, 2025 and our other filings with the SEC. Accordingly, you should read this press release completely and with the understanding that our actual future results may be materially different from what we expect.
Forward-looking statements speak only as of the date of this press release. Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this press release, whether as a result of new information, future events, or otherwise. You should not place undue reliance on the forward-looking statements included in this press release or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
June 30, 2025
(Unaudited)
December 31,
2024
(in thousands, except shares and par value data)
Assets:
Fixed maturity securities available-for-sale, at fair value (amortized cost: $415,406 in 2025 and $434,965 in 2024)
$
419,247
$
438,752
Utility & Infrastructure Investments, at fair value (cost of $172,753 in 2025 and $216,075 in 2024)
176,332
270,242
Short-term investments
251,906
52,612
Loans to affiliates
107,501
13,501
Other invested assets
280
280
Total invested assets
955,266
775,387
Cash and cash equivalents
23,529
26,573
Due from broker
2,035
—
Investment income due and accrued
6,539
5,642
Premiums receivable, net of allowance for credit losses of $6,091 in 2025 and $5,907 in 2024
89,156
53,500
Deferred policy acquisition costs, net of ceding commissions
27,583
21,552
Prepaid reinsurance premiums
6,679
3,905
Deferred income tax asset, net
10,322
9,670
Reinsurance recoverable, net of allowance for credit losses of $0 in 2025 and $0 in 2024
155,432
133,616
Receivable from affiliates, net
744
16,857
Ceded unearned premiums
73,163
68,205
Other assets
12,704
8,531
Total assets
$
1,363,152
$
1,123,438
Liabilities, stockholders' equity and non-controlling interest:
Liabilities:
Reserves for unpaid losses and loss adjustment expenses
451,466
403,576
Unearned premiums
259,700
212,828
Securities sold, not yet purchased, at fair value (cost of $0 in 2025 and $932 in 2024)
—
930
Payable to reinsurers
38,124
27,160
Due to broker
—
9,189
Accounts payable and accrued expenses
31,067
38,061
Funds held under reinsurance treaties
1,982
2,092
Income tax payable
17,249
26,488
Other liabilities
3,391
4,307
Total liabilities
802,979
724,631
Stockholders' equity:
Preferred stock, $0.001 par value, 100,000,000 shares authorized and none issued or outstanding.
—
—
Common stock, $0.001 par value, 500,000,000 shares authorized, 48,066,674 and 38,386,433 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively.
48
38
Additional paid-in capital
495,954
360,703
Retained earnings
60,652
34,569
Accumulated other comprehensive income
3,035
2,997
Total stockholders' equity
559,689
398,307
Non-controlling interest - General Partner
484
500
Total stockholders' equity and non-controlling interest
560,173
398,807
Total liabilities, stockholders' equity and non-controlling interest
$
1,363,152
$
1,123,438
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
(in thousands, except per share amounts)
Revenues
Gross written premiums
$
167,502
$
126,614
$
283,645
$
208,219
Ceded written premiums
(50,231
)
(41,838
)
(76,503
)
(61,187
)
Net written premiums
117,271
84,776
207,142
147,032
Change in unearned premiums
(30,343
)
(12,138
)
(41,913
)
(6,115
)
Net premiums earned
86,928
72,638
165,229
140,917
Fee income
1,524
191
2,084
316
Net investment income
11,891
5,728
19,786
10,981
Net realized and unrealized gains (losses) on investments
1,409
(4,215
)
(3,190
)
(1,828
)
Other income
28
24
993
48
Total revenues
101,780
74,366
184,902
150,434
Expenses
Losses and loss adjustment expenses
50,412
44,128
97,274
85,174
Underwriting, acquisition and insurance expenses
28,430
24,315
53,315
47,705
Interest expense
447
544
894
1,094
Other expenses
161
56
399
110
Total expenses
79,450
69,043
151,882
134,083
Income before income taxes
22,330
5,323
33,020
16,351
Income tax expense
4,713
1,207
6,953
3,277
Net income
17,617
4,116
26,067
13,074
Less: Net income (loss) attributable to non-controlling interest - General Partner
(5
)
(828
)
(16
)
374
Net income attributable to stockholders
17,622
4,944
26,083
12,700
Other comprehensive income:
Unrealized gains (losses), net of taxes
152
840
38
3,349
Total comprehensive income attributable to stockholders
$
17,774
$
5,784
$
26,121
$
16,049
Earnings per share:
Basic
$
0.40
$
0.14
$
0.61
$
0.35
Diluted
$
0.39
$
0.14
$
0.60
$
0.35
Weighted-average shares outstanding:
Basic
42,084,982
36,242,682
41,191,609
36,235,158
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At first glance, these secular tailwinds may appear most favorable for GPU designers such as Nvidia and Advanced Micro Devices. However, rising GPU acquisition ignites demand for other mission-critical services within the broader semiconductor landscape, too. Let's dig into why Micron Technology (NASDAQ: MU) also looks well positioned alongside its chip peers to benefit from rising AI infrastructure spend from the hyperscalers. Is now a good time to scoop up shares of Micron with earnings scheduled for September? Read on to find out. What does Micron do? Nvidia and AMD design advanced chipsets called GPUs, which serve as the core architectures on which AI models are trained and inferenced. Micron enters the equation through its high-bandwidth memory (HBM) solutions, which essentially help keep GPUs running at optimal speeds and help prevent bottlenecks during data workload processing. Outside of data centers, Micron's DRAM and NAND products power applications across Internet of Things (IoT) devices such as smartphones and gaming PCs, as well as cloud infrastructure and more industrial applications such as autonomous automotive systems and robotics. How large of an opportunity is high-bandwidth memory? According to data compiled by Bloomberg Intelligence, the total addressable market for HBM was estimated to be worth $4 billion in 2023. This figure is expected to grow at a 42% compound annual growth rate through 2033, reaching approximately $130 billion by the early 2030s. Despite this rapid acceleration, the HBM market remains highly concentrated. Only a few companies such as Micron, Samsung, and SK Hynix are producing HBM solutions at global scale. While competition is intense, I see this industry concentration as the foundation of Micron's high strategic market value. As hyperscalers expand AI capacity, many will seek to diversify their supply chains for different chip components. This makes sense, as big tech does not want to rely solely on a singular vendor in order to ensure steady access to chip supply, lock in favorable pricing, and access broader manufacturing footprints. With its growing HBM capabilities, Micron is well positioned to acquire additional market share in this environment. Is Micron stock a buy right now? The chart below benchmarks Micron against a small cohort of leading chip stocks on a forward price-to-earnings (P/E) basis. Data by YCharts. The obvious thing that sticks out is that Micron's forward P/E experienced notable compression during late 2024. This is due, in part, to the lumpiness in Micron's financial guidance since accurately forecasting demand trends for a still-developing market such as HBM is challenging. Investors tend to shy away from uncertainty, which appears to be weighing on sentiment around Micron at the moment. The valuation disparity between between Micron and its peers could suggest that investors do not fully understand or appreciate just how important the company's products are to overall AI infrastructure. Micron's HBM solutions and edge computing products are essential for AI development at scale. As the market begins to connect the dots between Micron's leadership in memory and storage chips to the broader AI narrative, there is significant room for Micron's valuation to expand. With earnings scheduled for next month and the stock still trading for a steep discount to its peers, Micron looks like a compelling buy right now. Should you invest $1,000 in Micron Technology right now? Before you buy stock in Micron Technology, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Micron Technology wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $660,783!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,122,682!* Now, it's worth noting Stock Advisor's total average return is 1,069% — a market-crushing outperformance compared to 184% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 13, 2025 Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
CBC
an hour ago
- CBC
Is the stock market in an AI bubble?
Stock markets surged again this week, reaching new all-time highs. Yet again, gains in financial markets were driven by a handful of companies focused on artificial intelligence. Tech giants like Meta and Nvidia have seen their values soar while investors wait breathlessly for OpenAI, Anthropic and Perplexity to go public. But for all the enthusiasm, some investors are worried. They say we've been down this road before. And they're pointing to the dot-com bubble in the 1990s when tech companies skyrocketed in value only to see the bubble burst in early 2000. "The difference between the IT bubble in the 1990s and the AI bubble today is that the Top 10 companies in the S&P 500 today are more overvalued than they were in the 1990s," wrote Torsten Sløk, Chief Economist at the economics research firm Apollo in a note on his website, citing the price-to-earnings ratios of the companies, a common measure of whether a company's stock may be overvalued. In other words, he says, this time the bursting bubble could be even worse that it was. And that's saying something. The dot-com bubble in the 1990s had many similarities to the market today. A new technology was offering a potential game-changing way of doing business, and everyone wanted a piece of it. When the bubble burst Many of today's biggest companies were founded in those nascent days of the internet. Companies like Apple, Amazon and Microsoft were key pillars to the then-new wave of technology companies. But other giants of the day failed and were wiped out when the bubble burst. Companies like and WorldCom raised hundreds of millions of dollars and collapsed. From 1995 to March of 2000, the NASDAQ index had climbed 80 per cent. Then the bubble burst. By October of 2002, the NASDAQ had dropped by a staggering 78 per cent from its peak, wiping out all the gains it made during the bubble. Today, it's not hard to find similarities in the markets. Investors are flocking into a space they don't fully understand, before the use-case application of the underlying technology is established. The real economy is struggling to find its footing amid all the turmoil and uncertainty associated with Trump's trade war and on-again, off-again tariffs. Job growth has slowed and the U.S. economy shrank in the first three months of the year. Some of America's biggest companies have been clobbered by tariff costs. GM says tariffs led to a $1.1 billion drop in profits. Ford posted its first quarterly loss in years. And still stocks are at all-time highs and there is a clear sense of FOMO (fear of missing out). "Every bubble in modern market history has been based on a narrative, whether it be the internet or real estate," wrote Wall Street trader Tom Essaye in his newsletter Sevens Report. "Today, that potentially bubble-inflating theme is unquestionably AI technology." What looks different this time But for all the similarities, there are some very obvious differences as well. Barry Schwartz joined the investment firm Baskin Wealth Management as the dot-com bubble was bursting. Today, he's the company's president and chief investment officer "Unlike the dot-com pre-revenue companies, these companies are profitable. They have global distribution, captive customers," he said in an interview with CBC News. Schwartz says Google, Apple, Meta and Amazon all have billions of customers. He says those businesses will continue whether AI becomes a game changer or not. But if it does, those tech giants will be poised to take advantage. "So this is not like chicken and the egg. The egg and the chicken are already on the table. The market understands it," said Schwartz. U.S. President Donald Trump's AI czar, billionaire David Sacks, says most people don't fully understand where AI development really is at the moment. "The Doomer narratives were wrong," he posted to the social media platform X. Sacks says that narrative was built on the notion that there would be a rapid take-off to artificial general intelligence which would propel one AI model to self improve rapidly enough to leave the others in the dust. But he says, the opposite is happening. "The leading models are clustering around similar performance benchmarks," he wrote in his lengthy post last week. "Model companies continue to leapfrog each other with their latest versions." More to the point, those models (like OpenAI's ChatGPT, X's Grok or Google's Gemini) are building what he calls "developing areas of competitive advantage." WATCH | AI 'assistants' could change how you use the internet AI agents could change how you use the internet 16 days ago OpenAI and other big tech companies are starting to roll out the next wave of artificial intelligence, designed to operate with more autonomy. CBC's Nora Young breaks down how agentic AI works and why some think it will change how you use the internet. So, from a market perspective, a handful of AI models are in healthy competition with one another. Meanwhile, the tech giants (Apple, Amazon, Meta just to name a few) are aggressively adapting AI into their business models. And chip makers like Nvidia can barely keep up with the insatiable demand all those companies have developed. Case in point, Nvidia hasn't just seen its stock take off. Its revenues are so big they're hard to wrap your head around. Since 2022 Nvidia's revenues have quintupled. Its profits are up more than tenfold. Tariff uncertainty – even for tech The fears of a repeat of the dot-com bubble may be legitimate. But for now, the more pressing threat is that financial markets start pricing in the impact of the global trade war. Multiple company earnings reports have shown just how deep tariffs are already biting. Automakers like GM and Ford led the charge, but the tech companies aren't immune. Apple says tariff-related costs will climb to $2 billion through the first half of this year. Schwartz says he knows just how dangerous it is to think that "this time is different." But he says the issue boils down to a pretty simple calculation. "It just comes down to one simple question. Do you think we're gonna be using more AI and data in the future or less?" he said.
CBC
an hour ago
- CBC
Las Vegas is hurting as tourism drops. Are Canadians behind the Sin City slump?
After doing gangbuster business in the post-COVID era, Las Vegas is in the midst of a slump, with the number of tourists down sharply as Canadians in particular avoid Sin City amid bilateral bad blood over trade. The total number of visitors is off more than 11 per cent year-over-year, according to data from the Las Vegas Convention and Visitors Authority, one of the most dramatic declines in recent memory outside of the pandemic. Airline figures reveal there's been an even steeper decline among Canadians going to the desert gambling mecca. The number of Air Canada passengers dropped by 33 per cent in June compared to the same month last year, airport figures show. WestJet, the largest Canadian air carrier at the region's Harry Reid International Airport, saw a similar 31 per cent drop. The decline was even more dramatic for low-cost carrier Flair, which saw its passenger numbers fall by a stunning 62 per cent. Some U.S. travellers are also avoiding the self-described entertainment capital of the world — due, in part, to a backlash over higher fees and fewer perks for some gamblers. But resort operators say the Canadian boycott has been a notable hit to the bottom line. On a quarterly conference call with investors last week, MGM Resorts president and CEO Bill Hornbuckle said the number of Canadian visitors started to fall earlier this year — around the time U.S. President Donald Trump launched his trade war — and there hasn't been much of a rebound. That company owns some of the city's top properties, such as Aria, Bellagio and the Cosmopolitan and part of the NHL rink, T-Mobile Arena. "International visitation has been an issue," Hornbuckle said. "Particularly earlier in the year, with Canada, we host a lot of hockey games, and we saw visitation down. And I think — I don't think, I know — it's still down," he said. Thomas Reeg, the CEO of Caesars Entertainment, another major resort and gaming company that owns properties up and down the Strip, pointed to Canadians as one reason for the company's disappointing second-quarter results. "International business, particularly Canadian, is softer," he said on a call with stock analysts. Explaining why fewer rooms were filled with guests over the last three months, Reeg said, "Canadians are a significant piece of that." Local union leaders have even taken to calling the dip in Canadian tourists the "Trump slump." Canadians cite Trump's 'disrespect' Winnipeg resident Martyn Daly is one of those visitors who's staying away. In an interview with CBC News, Daly said he and his wife typically go to Vegas once a year, but he can't bring himself to do it this year with the trade war raging. "We're pretty upset with what's going on in the U.S. and the disrespect that's been shown by the Trump administration towards Canada. I just feel obliged to do something — and one little thing I can do is not patronizing a place we enjoy," he said. "It's not a good idea to be spending any of our hard-earned money in the States. I can spend it elsewhere with a clear conscience." He's also leery of what he may face at the Canada-U.S. border amid reports some travellers are being held up for questioning or, in some rare instances, detention. Guy Kerbrat, of Regina, cancelled a long-planned trip to Vegas to see an AC/DC concert to protest Trump's treatment of Canada. "The thought of going down there right now — it doesn't make you feel warm and fuzzy. We just couldn't do it," Kerbrat said in an interview. "My wife and I, we are Vegas-goers. It's a destination we enjoy. But we looked at each other and said, 'We can't support Trump and these policies that are so anti-Canadian.' I hate to hurt the people, the workers who aren't supportive of what Trump's doing, but we had to take a stand," he said. Economic hardship There's evidence that Nevadans are facing some economic challenges as a result of these disruptions. Nevada's unemployment rate, at 5.4 per cent, is the highest among the states and second only to Washington, D.C., where there have been Trump-induced federal layoffs. One of Nevada's U.S. senators, Catherine Cortez Masto, was part of a bipartisan delegation to Ottawa last month to meet with Prime Minister Mark Carney to try and patch up relations amid what she called "the chaos of the Trump presidency." The Democrat said cratering tourism is "having an impact" and she wants to see "de-escalation" to normalize visitor numbers to the Silver State. Local politicians have good reason to be anxious about the Canadian travel boycott, said Stephen Miller, an economics professor at University of Nevada, Las Vegas. As the director of the university's business and economic research centre, he crunched the numbers and found Canadians contributed $3.6 billion US to the local economy last year. Canadian spending supported some 43,000 jobs in the region, more than those employed in the manufacturing sector, Miller said. That $3.6-billion figure comes close to the economic output of the local Nellis Air Force base — and that's saying something, given it's one of the largest and most important military installations in the U.S., with some 15,000 personnel. "The Canadian numbers have gone down dramatically and it's an area of concern for the casinos," Miller said. "After all, the main goal of the resort industry is to put heads in beds." He expects more promotional activity in the weeks ahead to try and break the patriotic boycott. "You might get people saying, 'Oh wait a minute, that's a really tempting offer. Let me reconsider my decision.'" Daly said he's already received "exceptionally good" offers with low room rates to try and lure him back. But he's not budging. "I know Canada is small but we do have a voice, and I think it's great that we're using it," he said. "I think the only thing that Trump seems to understand is when people take action that hits them in the pocketbook."
