Blue Screen Media ApS @CPHequities: "𝗦𝗼𝗮𝗽 𝗶𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗮𝗶𝗿..."

Denmark

𝗦𝗼𝗮𝗽 𝗶𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗮𝗶𝗿 🫧🫧🫧 "S.O.A.P. Is In The Air" was a song launched in 2000, coinciding with the peak of the dotcom bubble. The timing was impeccable – just as the bubble was about to burst, the Danish band S.O.A.P. released a song that could serve as its theme. Luckily, we are far from a bubble burst today. Last week, I was a guest on the Danish podcast Millionærklubben (The Millionaire's Club), where we discussed whether we are in an AI bubble. It was a great conversation, and I want to share some of my thoughts with you here. 𝗧𝗵𝗲 𝘀𝗵𝗼𝗿𝘁 𝗮𝗻𝘀𝘄𝗲𝗿: 𝗡𝗼, 𝘄𝗲 𝗮𝗿𝗲 𝗻𝗼𝘁 𝗶𝗻 𝗮 𝗯𝘂𝗯𝗯𝗹𝗲. But there is some soap in the air – small pockets of froth, especially in private markets. And this is something investors should be aware of. Let me explain. The Magnificent Seven stocks have seen their earnings per share grow by 123% over the last two years. These are real profits from real businesses that have been generating cash for years – long before we started talking about generative AI. The froth is in private markets. OpenAI is a fascinating company, but also a very unusual one. It is not uncommon for a startup to run at a loss for several years – OpenAI plans to do so until 2030. What is remarkable is the scale of their ambitions: They want to invest 1,400 billion dollars. That is quite unusual 😊 They plan to grow from 15-20 billion dollars in revenue today to 200 billion dollars by 2030. A tenfold increase in five years. If they succeed, they say they will become "wildly profitable". If they fail, the ripple effects will be felt across many publicly traded companies that have made deals with them. 𝗧𝗵𝗶𝘀 𝗶𝘀 𝘁𝗵𝗲 𝗿𝗶𝘀𝗸 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝗻𝗲𝗲𝗱 𝘁𝗼 𝗯𝗲 𝗮𝘄𝗮𝗿𝗲 𝗼𝗳. Earlier this year, a deal with OpenAI would send a stock up 10%. Now, the same type of announcement can send a stock down. That is a sentiment shift. And I think it is healthy – it means investors are paying more attention to the fundamentals and the risks. But here is the thing about OpenAI: They have a path to success. With 800 million weekly users, they could become the new Google – taking a cut of every transaction that starts with an AI search. If you are looking for a hotel, a flight or a product, you can research it via ChatGPT and then buy it, and OpenAI could take 2-3% of that transaction. That is a massive business if it works. Their hardware ambitions are riskier. They have acquired Jony Ive's firm to create the successor to the smartphone. Inventing a new device category is extremely difficult. I would bet on the "new Google" model before I bet on the hardware. Now, should you exit the market because of these risks? Absolutely not. If you had exited the market in 1996 because you were worried about a bubble, you would have missed four years of incredible returns. The bubble did not burst until 2000. Timing is challenging to get right, and you will almost certainly miss the best days if you try to jump in and out. 𝗔𝗜 𝗶𝘀 𝘁𝗵𝗲 𝗶𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝘁𝗵𝗲𝗺𝗲 𝗼𝗳 𝘁𝗵𝗶𝘀 𝗱𝗲𝗰𝗮𝗱𝗲, and possibly the next. We could be in the early stages of building a bubble, but we are not there yet. And even if we are heading there, it could take years to develop. So what am I doing? I added to my $GOOG (Alphabet) (Alphabet) position last month. A few weeks later, Warren Buffett's Berkshire Hathaway did the same, and the stock jumped another 5%. I am not saying he copied me, but the timing is suspicious 😉 Alphabet has everything: Their own AI chips (TPUs) since 2016. Their own language models. A massive cloud infrastructure. And most importantly – 𝗮 𝗵𝘂𝗴𝗲 𝗰𝗮𝘀𝗵 𝗽𝗶𝗹𝗲 𝘁𝗵𝗮𝘁 𝗢𝗽𝗲𝗻𝗔𝗜 𝗱𝗼𝗲𝘀 𝗻𝗼𝘁 𝗵𝗮𝘃𝗲. They can finance their AI investments with free cash flow. They do not need to raise 1,400 billion dollars from investors. Some worry that ChatGPT will kill Google Search. Although this is worth monitoring, take a look at the numbers: 800 million people use ChatGPT every week, yet Google continues to grow its advertising revenue. The two can coexist. And Google has Gemini – their own AI assistant – which they just updated to version 3. The bottom line: Stay invested. Be aware of the risks in private markets and companies heavily dependent on OpenAI's success. But do not let bubble fears push you out of a market that still has years of potential ahead. There is soap in the air, not foam on the floor. Thanks for copying and following 🙏 $SPX500 $NSDQ100 $GOOG $MSFT (Microsoft) $NVDA (NVIDIA Corporation) P.S. If you want to hear the whole discussion about AI bubbles, go to this link (it is in Danish): podcasts.apple.com/qa/podcast/chipk%C3%A6mpen-nvidia-tester-ai-appetitten-s%C3%A5dan-kan-det/id485312851?i=1000737386426 𝘊𝘰𝘱𝘺 𝘛𝘳𝘢𝘥𝘪𝘯𝘨 𝘥𝘰𝘦𝘴 𝘯𝘰𝘵 𝘢𝘮𝘰𝘶𝘯𝘵 𝘵𝘰 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘢𝘥𝘷𝘪𝘤𝘦. 𝘠𝘰𝘶𝘳 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘷𝘢𝘭𝘶𝘦 𝘮𝘢𝘺 𝘨𝘰 𝘶𝘱 𝘰𝘳 𝘥𝘰𝘸𝘯. 𝘠𝘰𝘶𝘳 𝘤𝘢𝘱𝘪𝘵𝘢𝘭 𝘪𝘴 𝘢𝘵 𝘳𝘪𝘴𝘬.

5 Mentioned

GOOG

Alphabet

SPX500

NSDQ100

MSFT

Microsoft

NVDA

NVIDIA Corporation

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