As common as it is to compare today’s artificial intelligence equity valuations to dot-com bubble levels, there is a reasonable argument to be made that the two periods are not similar, even if market leadership spikes resemble past booms.
source: Bank of America Global Research, Leo Nelissen
Of course, we might also note that each valuation boom “ended” at some point, with valuations normalizing.
So it is rational to expect a repeat.
On the other hand, the comparisons might be wrong.
Forward price-earnings ratios for market leaders are nowhere near internet bubble levels, though that might not be the case for smaller growth names.
source: Ritholz Wealth Management, Leo Nelissen
The “complication” is earnings growth. So long as that continues, so does the support for valuation.
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