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CBC
a day ago
- Business
- 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.
New York Times
11-07-2025
- Business
- New York Times
The Danger of a Market Melt-Up
Market meltdowns have been a big worry lately, and for good reason. With President Trump imposing the highest tariffs since the Great Depression and enacting myriad other disruptive policies, the threat of another market crash can't be ignored. Yet despite an 18.9 percent downturn in the S&P 500 earlier this year, the stock market has rebounded. It has continually shrugged off shocks that, in previous years, may have set off a prolonged bear market. In fact, stocks have become expensive again. While the potential for a serious market downturn hasn't vanished, I think it's also time to begin thinking about another problem: the danger of a market melt-up. By many measures, we're already in perilously overvalued territory. On a historical basis, share prices are high in relation to corporate earnings, assets and the size of the overall economy. I don't want to go too far with this. The U.S. stock market isn't nearly as expensive as it was at the height of the bubble in the late 1990s and early 2000. But it is increasingly pricey — surprisingly so, when you consider the repeated blows to market sentiment dealt by the Trump administration. Tariffs re-emerged as a major issue over the past week. The administration issued an array of announcements: Tariffs will increase, be delayed, not be delayed, be imposed on copper, be negotiated lower, be made permanent, and on and on. Who really knows? The stock market has been absorbing this information, stumbling from time to time but then regaining its footing. While the economic impact of the tariffs has barely been felt yet, the stock market remains much higher than it was at the beginning of the year. Want all of The Times? Subscribe.
Yahoo
05-05-2025
- Business
- Yahoo
If You'd Invested $1K at Williams Sonoma's IPO, Here's How Much Richer You Would Be Today
Williams Sonoma (WSM) is an high-end retailer that offers kitchen and home appliances, furniture and accessories. And while the stock has been on a tear lately, many investors don't know that Williams Sonoma has been a public company for over 40 years. Read Next: Check Out: The original IPO was launched in 1983, and over the years the stock has split several times. If you invested in Williams Sonoma on the IPO date, you would be a very wealthy person today. Williams Sonoma launched as a high-end store for the discerning cook and grew quickly after being purchased by Howard Lester in 1976. The company had an initial public offering (IPO) of 1 million shares for over-the-counter investing (OTC) on July 8, 1983. The IPO launched at $23 per share — around $0.38 split-adjusted price. The stock had a rocky start and eventually dropped about 50% during the first half of the 1980s due to inflation scares and high interest rates. In September 1986, Williams-Sonoma, Inc. acquired Pottery Barn from Gap and expanded its operations and distribution centers. The company continued to open new stores, averaging around 12 new stores per year. From the acquisition of Pottery Barn in 1986 until 1990, the stock price soared to nearly five times the IPO listing price. But a downturn became imminent during the early 1990s recession, and it took until November 1993 to reach new all-time highs. The growth of the company and acquisition of companies within the Williams Sonoma brand started to pay off. While the stock remained volatile in the 1990s, the stock price rose nearly 10 times from 1993 to the height of the Dot Com Bubble in 2000. Of course, the stock crashed — along with the rest of the market — but rose to new heights within a few years. The split-adjusted price of the stock just before the Great Recession started in 2007 was around $22 per share, or nearly a 5,400% return since IPO! Fast forward the next 25 years, and Williams Sonoma stock has done very well. The current stock price is now around $150 per share — or around a 39,400% return since IPO! For You: Williams Sonoma stock is not for the faint of heart. Several times over it's 42-year life, the stock has plummeted nearly 90% — only to recover and grow several years later. But investors that believed in the company and purchased $1,000 worth of Williams Sonoma stock at its IPO in 1983 would have been handsomely rewarded for not selling. With several stock splits over the decades, an initial IPO stock price of $23 per share is the equivalent to around $0.38 per share in today's market. This means that while $1,000 would have bought around 43 shares of Williams Sonoma stock back in 1983, due to eight different stock splits, you'd be holding around 2,612.25 shares of Williams Sonoma stock today. Those shares — at the current Williams Sonoma stock price of around $150 — would be now worth around $391,837.50! This is a huge return on your money and far outpaces the S&P 500. In fact, putting $1,000 in the S&P 500 back in 1983 until today would have yielded around $97,000. Holding WSM stock for those 40 plus years would have netted you nearly $300,000 more! Williams Sonoma stock is currently down around 30% from its all-time highs in January 2025. But the retailer continues to post great profits, has a portfolio of strong brands and has a more reasonable price-to-earnings ratio than most of the market — around 16. While the stock could struggle in the short-term due to market volatility — and the unknown long-term consequences of tariffs — Williams Sonoma stock has been through poor markets before and bounced back. Williams Sonoma stock could be a good investment — but could also drop heavily if tariffs take a huge bite out of profit margins. Time will tell, but it's hard to deny that Williams Sonoma stock has done well over the past few decades. As always, past performance does not indicate future results, and any stock price predictions are not a recommendation to buy or sell any securities. It's a good idea to speak with a licensed financial advisor before making any investment decisions. Editor's note: Stock pricing information was sourced from TradingView and is accurate as of April 2025. More From GOBankingRates Mark Cuban: Trump's Tariffs Will Affect This Class of People the Most How Far $750K Plus Social Security Goes in Retirement in Every US Region How To Get the Most Value From Your Costco Membership in 2025 12 SUVs With the Most Reliable Engines This article originally appeared on If You'd Invested $1K at Williams Sonoma's IPO, Here's How Much Richer You Would Be Today
