①Renowned trader Danny Moses believes that the current artificial intelligence market is experiencing a bubble, similar to the internet era at the beginning of the 21st century, and investors should exercise caution; ②Moses advises investors to choose leading companies in the technology sector and views uranium as a key metal for AI infrastructure development.
With the booming development of artificial intelligence (AI), many financial professionals are weighing two key questions: Is there a bubble in the AI market, and if so, should it be compared to the internet era of the early 21st century?
Danny Moses, one of the real-life figures portrayed in the movie 'The Big Short' and a well-known trader, believes that the answer to both questions is affirmative. While he does not deny that the AI boom is real and represents a long-term growth story, he also sees strong similarities between these two tech booms, suggesting that investors need to proceed with caution.
Moses gained fame for shorting the real estate market during the subprime mortgage crisis. In his latest interview, he discussed the emerging potential issues in the AI market and how he believes investors should navigate this rapidly evolving field.
"The growth is real, but the math doesn't add up," he said. "I think we're reaching a point where the math doesn't work anymore."
Moses emphasized that his view on the potential issues in the AI market is not a call to short the industry. Instead, he pointed out that it is a call for investors to do their homework and identify the right companies to gain valuable exposure in a market that continues to grow.
In his view, this means sticking to investing in the most dominant companies in the technology sector—those with the resources to continue expanding and not as constrained as some smaller firms. The best examples include $Amazon (AMZN.US)$ 、 $Alphabet-A (GOOGL.US)$ 、 $Meta Platforms (META.US)$ and $Microsoft (MSFT.US)$ 。
"They can cut capital expenditures at any time, and their cash flow remains positive, unlike other companies that rely on spending within the AI sector," he added.
However, Moses does not have a positive outlook on all large tech companies. He uses $Oracle (ORCL.US)$ as an example to illustrate the problems in the AI market, pointing out risks related to the company's high debt levels and the cash required to fulfill orders from tech clients. He also specifically mentions volatile tech stocks such as $Super Micro Computer (SMCI.US)$ and $CoreWeave (CRWV.US)$ , considering them to be higher-risk investment targets within the AI sector.
Nevertheless, in his view, investors are finally starting to consider the fact that not all AI stocks are created equal, as the gap between relative outperformers and underperformers becomes increasingly hard to ignore.
"I think this shows that investors are starting to differentiate between the winners and losers in trades, and they are more willing to invest in companies with stronger, more secure balance sheets as a way to express the artificial intelligence theme," he added.
Moses also expressed optimism about uranium, as the metal is increasingly being touted as a key component in AI infrastructure development, which will be essential for sustaining the industry in the coming years.
Due to tight power supply in the U.S., some data centers are inclined to adopt small nuclear reactors as their primary power source, with uranium being the main raw material for nuclear plants.
"One of my favorite trades is uranium. Thematically, it should work but will take a long time. There is a mismatch between when people believe companies will experience AI-driven growth and the actual infrastructure needed to drive that growth," he added.
Editor/KOKO