In more uncertain scenarios small companies can't take risks as well as big companies. The last 2 years have seen AI, which is a large risk these big companies invested in, pay off. But due to uncertainty smallish companies couldn't capitalize.
But that's only one possible explanation!
LOL. It's paying off right now, because There Is No Alternative. But at some point, the companies and investors are going to want to make back these hundreds of billions. And the only people making money are Nvidia, and sort-of Microsoft through selling more Azure.
Once it becomes clear that there's no trillion dollar industry in cheating-at-homework-for-schoolkids, and nvidia stop selling more in year X than X-1, very quickly will people realize that the last 2 years have been a massive bubble.
And I don't know, because I have about 60 minutes a week to think about this, and also good quantitative market analysis is really hard.
So whilst it may sound like a good reposte to go "wow, I bet you make so much money shorting!" knowing that I don't and can't, it's also facile. Because I don't mind if I'm right in 12, 24 or 60 months. Fwiw, I thought I'd be right in 12 months, 12 months ago. Oops. Good thing I didn't attempt to "make money" in an endeavor where the upside is 100% of your wager, and the downside theoretically infinite.
Mind you, this is a view that exists - a few large hedge funds and sell side firms currently hold negative positions/views on these companies.
However, the fact of the matter is, fewer people are willing to take that bet than the opposite view. So it is reasonable to state that view with care.
You might be right at the end of the day, but it is very much not obvious that this bet has not (or will not) pay off.
They are also all tech companies, which had a really amazing run during Covid.
They also resemble companies with growth potential, whereas other companies such as P&G or Walmart might’ve saturated their market already
Only 8 out of the 10 are. Berkshire and JP Morgan are not. It is also arguable whether Tesla is a tech company or whether it is a car company.
Apple is 22% of BRK’s holdings. The next biggest of their investments are Amex, BoA, Coke, Chevron.
They are not a tech company.
At any point in time the world thinks that those top 10 are unstoppable. In the 90's and early 00's... GE was unstoppable and the executive world was filled with acolytes of Jack Welch. Yet here we are.
Five years ago I think a lot of us saw Apple and Google and Microsoft as unstoppable. But 5-10 years from now I bet you we'll see new logos in the top 10. NVDA is already there. Is Apple going to continue dominance or go the way of Sony? Is the business model of the internet changing such that Google can't react quick enough. Will OpenAI go public (or any foundational model player).
I don't know what the future will be but I'm pretty sure it will be different.
[1] https://www.visualcapitalist.com/ranked-the-largest-sp-500-c...
Typically, you probably need to go down to the S&P 25 rather than the S&P 10.
If you’re referencing Trump’s tariffs, they have only come into effect now, so the economic effects will be felt in the months and years ahead.
Can anyone shed light on what is going on between these two groups. I wasn't convinced by the rest of the argument in the article, and I would like something that didn't just rely on "AI" as an explanation.